Frustrated by extra credit card fees when you shop?
The bipartisan bills in Congress aim to lower the swipe fees that retailers pay each time they make a purchase with their card. The effort is backed by retail giants including Walmart ( WMT ) Target ( TGT ) and Kroger ( KR ) as well as convenience stores and independent stores.
“Credit card fees are higher in the United States than anywhere else in the industrialized world – seven times higher than in Europe,” a business coalition wrote to lawmakers last week. “They are an inflation multiplier.”
Interchange fees are applied through a complex system, and fees vary depending on the merchant, the size of the transaction, the type of card used and the banking institution, among other things. Merchants paid about $138 billion in processing fees last year, according to the Nilson Report, a payment industry publication.
These fees are typically between 1% and 3% of the final price of a transaction, and stores often charge customers at higher prices.
Visa ( V ) and Mastercard ( MA ) dominate more than 80% of the US credit card market. In July, U.S. Senators Dick Durbin of Illinois and Roger Marshall of Kansas introduced legislation to allow businesses to route many payments to alternative networks that aren’t handled by Visa ( V ) or Mastercard ( MA ). This week, US Reps. Peter Welch of Vermont and Lance Gooden of Texas proposed a similar measure.
Supporters of these bills say they would create more competition in the online credit card market and break the hold of Visa and Mastercard in the industry.
“Credit card transaction fees inflate the prices consumers pay for food and gas,” Durbin said in July. “Bringing real competition to credit card networks will help reduce swipe rates and lower costs for Main Street merchants and their customers.”
Visa and Mastercard say the fees help fund rewards programs and banking services and help reduce risk for merchants by guaranteeing payment even in the event of fraud or a customer paying a credit card bill.
Credit card companies say the law would not lower prices for consumers and would instead lead to unintended consequences such as fewer rewards, less access to credit and risks to data security.
“This legislation would once again increase merchants’ fees at the expense of everyday Americans — taking away credit card rewards and usurping the network’s opportunity,” said Jeff Tassey, president of the Electronic Payments Coalition, which represents card issuers and networks.
There is also concern that credit cards may become more expensive and less obtainable for some consumers.
Some credit unions serving underbanked communities are concerned the legislation could limit customers’ access to credit, said Deshundra Jefferson Credit Union National Association spokeswoman.