Businesses hopeful bill will reduce credit card ‘swipe fees’

Sen. Roger Marshall has introduced a bill that would reduce fees by introducing competition.
Published: Aug. 26, 2022 at 7:05 PM CDT
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WICHITA, Kan. (KWCH) - Kansas businesses hope a proposed federal bill will bring changes to what they must pay every time a customer pays with a credit card.

Last year, the merchant process fees, or “swipe fees,” cost businesses in the U.S. more than $137 billion. That expense often is passed on to consumers in the costs of items, and since the start of the COVID-19 pandemic more than two years ago, people are using credit cards far more often at store checkouts.

The average merchant process fee is about 2% for each credit card transaction. Friday morning, a group of Kansas business owners spoke with Sen. Roger Marshall about the issue. Marshall is sponsoring legislation he says would bring in more competition and help to ease the burden from the swipe fees.

Large and small businesses say these fees are a hassle.

“People like me that’s struggling with one location, to be able to keep or doors open and to not pass that on to customers is really taking a hit on our bottom line,” said The Monarch Founder and CEO Jennifer Ray.

For a grocery store chain like Dillons, the swipe fees amount to one of their largest expenses.

“Those costs are more expensive than what we would typically see for the utilities to power all of our store locations,” Dillons Spokesperson Sheila Regehr said.

The National Association of Convenience Stores said for Kansas’ 1,200 convenience stores, the swipe fees cost $110 million last year, an expense second only to labor costs.

“The American household paid $900 extra in swipe fees just last year, said National Association of Convenience Stores Government Relations Director Anna Blom. “We know that that’s gone up this year because of inflation.”

Sen. Marshall said the bill he introduced last month with Illinois Senator Dick Durban would reduce those fees by introducing competition.

“(It would) require that the credit card that the bank issues has two routers on it, only one of which can be Mastercard or Visa. The bank gets to choose the other one, so maintaining the security,” Marshall explained.

Retailers then would have the choice to select the routing system for card transactions. Marshall said Visa and Mastercard control more than 80% of this market.

“If it’s a high-rewards credit card, it comes with an even higher fee,” Blom explained. “For a retailer, when they get their monthly statements, it’s unclear what those fees look like.”

Card companies use the swipe fees for their rewards programs and banking services, as well as to deal with fraud.

The National Association of Convenience Stores said Kansas retailers face some of the highest swipe-fee rates. By their estimates, the bill senators Marshall and Durban introduced could reduce swipe fees by $11 billion.

The Heartland Credit Union Association, in a release, said the bill has consequences that could impact security and add costs for financial institutions that could limit lending their ability.

“This bill would not benefit consumers in terms of cost or enhanced security and would create a reduction in options, all without legally requiring merchants to protect consumer data. In a state like ours, where nearly one in four households are unbanked or underbanked, we can’t afford to make it any harder for working families to access basic financial services,” says Lisa Althoff-Simmons, interim president/CEO of Heartland Credit Union Association.