While you may not know it, every time you use your credit card to make a purchase, Visa and Mastercard charge the retailer a “swipe fee” of up to 4 percent. While this hidden charge won’t show up on your receipt, retailers across the U.S. shell out over $100 billion in credit card swipe fees every year — a figure that has surged over 50 percent in the past four years as Visa and Mastercard continue to jack up their rates. But retailers don’t bear this burden alone, as they are often forced to pass these additional fees on to customers in the form of higher prices. In fact, estimates show that swipe fees cost the average American household at least $1,100 every year.
Visa and Mastercard — backed by Big Banks such as Wells Fargo, Bank of America, and others that represent the biggest issuers of credit cards — want the power to increase swipe fees as much as they want. You can add it to the pile of billions of dollars in junk fees Americans are already forking over every year to their banks — from $8 billion in overdraft fees to $120 billion in credit card interest and fees. This has resulted in Americans collectively carrying a whopping $1 trillion in credit card debt.
It’s hardly a surprise, then, that the banking industry is in the midst of an income and profit boom. Megabanks reported record profits in the first quarter of 2024: JP Morgan Chase’s net income skyrocketed by nearly 45 percent, while Citi Group and Wells Fargo boasted profit margins that exceeded $13.4 billion and $41.9 billion, respectively. Meanwhile, Visa and Mastercard are continuing to rake in big profits.
These massive profits make it all the more laughable when banking industry mouthpieces like the Electronic Payments Coalition (EPC) — the Visa-Mastercard-Big Bank funded group campaigning against swipe fee reform — claim that swipe fees are necessary for funding their wealthier customers’ credit card rewards. Clearly, these profit-churning corporations can pay out those points without making all Americans pay more for their groceries at the checkout counter.
Of course, given the Big Banks’ litany of anti-consumer practices over the years, there is no reason for policymakers or any American to trust them on this issue. Big Banks have repeatedly been found to engage in predatory activities such as charging double fees for insufficient funds, disclosing sensitive personal information without consumers’ consent, and ironically, withholding credit card reward bonuses from their customers.
Wells Fargo (an EPC member), for instance, was fined $100 million by the Consumer Financial Protection Bureau (CFPB) for secretly opening unauthorized accounts. Bank of America (an EPC member) was forced to pay more than $100 million to customers for an array of anti-consumer offenses. U.S. Bank (another EPC member) was fined nearly $38 billion by the CFPB for opening unauthorized accounts and lines of credit.
Payment processing companies have proved to be just as guilty – a Buzzfeed News investigation revealed Visa and Mastercard’s complicity in facilitating business fraud and obscuring junk fees under the guise of funding data security.
But fining institutions millions of dollars has proven to be an ineffective strategy to curb their predatory practices – if anything, they’re glad to simply part with a fraction of their gains.
That is what makes federal action so critical. The bipartisan Credit Card Competition Act (CCCA) would finally bring about some common-sense swipe fee reform by increasing competition in the credit card industry and breaking up the Visa-Mastercard duopoly. Unsurprisingly, the EPC and its members have spent tens of millions of dollars to preserve their right to charge ever-increasing swipe fees on retailers and their customers.
It's time for Congress to stand up to the banking industry and side with families and small businesses. Without action, Americans will continue to be forced to drain their bank accounts as Visa, Mastercard, and the Big Banks reap more and more profits at their expense.
