Interchange fees

American Express charge cards
by David Klemt David Klemt No Comments

Credit Card Competition Act, Take Two

Credit Card Competition Act, Take Two

by David Klemt

American Express charge cards

As we approach Election Day on November 8, it’s important to keep in mind that the Credit Card Competition Act of 2022 is still in play.

In fact, reports predict that another attempt to pass the bipartisan bill will take place in November. If reports are accurate, Senators Dick Durbin (D-IL) and Roger Marshall (R-KS) will try to include the bill in the National Defense Authorization Act (NDAA).

Now, that sentence and strategy may have you scratching your head. What, you may be asking yourself, do credit card fees have to do with defense spending?

Well, not much, truthfully. But you’re probably well aware that politicians will try to amend bills in bids to pass legislation they want. The common term for such a provision is “rider.”

It’s not difficult to understand why the Credit Card Competition Act has gone nowhere when we view Sens. Durbin and Marshall’s rider tactic.

Earlier this month, the senators attempted to include their bill within the NDAA. The reason is simple: the bill specifies the US Department of Defense’s (DoD) budget and expenditures each year. In other words, this is a “must-pass” bill.

However, Sens. Durbin and Marshall aren’t the only senators sponsoring bills. And they’re certainly not the only senators attempting to attach riders to the NDAA.

“It’s a bold strategy, Cotton.”

I will say, at least Sen. Durbin’s effort to attach the Credit Card Competition Act rider to the NDAA is somewhat related to the DoD.

You see, he and Sen. Marshall tried to tack on two amendments to push their bill through. The first amendment theorizes that veterans are being hurt by credit card fees. According to the senators, when military veterans make purchases at a military commissary, they are sometimes subjected to surcharges related to merchant interchange fees.

The second amendment brings the US Treasury Department and US Defense Department into the mix. This effort directs the departments to research just how much veterans are paying (annually, one would assume) in surcharges, and which companies these fees benefit. Then, the departments are to issue this report to Congress.

So, hey, points for attempting to make including the Credit Card Competition Act of 2022 relate to the NDAA for FY 2022. Of course, other senators are attempting to include their own riders. Should reporting prove accurate, some 900 amendments have been proposed. Supposedly, a few dozen might just make it.

This strategy didn’t work this month because the NDAA vote isn’t taking place in October. Instead, the plan is for the vote to take place sometime mid-November, when the US Senate reconvenes.

To learn more about the Credit Card Act of 2022, click here. If it’s a bill you support, let your elected officials know. Should you oppose the bill, let that be known to lawmakers as well.

Image: CardMapr.nl on Unsplash

Close up of stack of credit cards
by David Klemt David Klemt No Comments

Swipe Fees Cost Over $77 Billion in 2021

Swipe Fees Cost Merchants Over $77 Billion in 2021

by David Klemt

Close up of stack of credit cards

A bill that intends to lower the credit card fees merchants pay by creating more competition within the industry is before Congress.

This bill, the Credit Card Competition Act of 2022, has bipartisan support. The two sponsors behind it are Sens. Richard Durbin (D-IL) and Richard Marshall (R-KS).

Of particular note, the bill seeks to amend the Electronic Fund Transfer Act. Specifically, the amendment targets the networks that merchants use to process electronic credit card transactions.

In short, banks that issue credit cards would have to merchants at least two processing networks. According to experts in this space, the bill prohibits banks from making those networks Visa and MasterCard.

Billions in Fees

So, why are Visa and MasterCard in the crosshairs of this bill?

According to the Merchants Payments Coalition (MPC), Visa and MasterCard control 87 percent of credit (and debit) card markets. Per the MPC, Visa and MasterCard account for about 576 million credit cards.

In the U.S. alone, transactions amounted to $3.49 trillion in 2021. Eye-wateringly, those transactions were accompanied by $77.48 billion in merchant fees for the two processing behemoths in the same year.

For additional context, Visa and MasterCard swipe fees totaled $61.6 billion in 2020. That represents an increase of 137 percent over the decade prior. Adding the merchant fees for all cards, the 2020 total was $110.3 billion, which is an increase of 70 percent from the previous ten years.

As veteran operators are well aware, swipe fees are among the highest costs for restaurants and bars.

Merchants Payments Coalition Sends Letter to Congress

Compellingly, the MPC is urging Congress to investigate the Visa-MasterCard duopoly. In their view, the two processors’ dominance is stifling competition; harming business owners and consumers; and contributing to inflation.

“The two giant card networks and their partner mega-banks routinely use their market power to stifle competition and charge merchants the highest swipe fees in the industrialized world,” reads the MPC’s letter to Congress.

Further, the letter states, “It is difficult to imagine any other market in the U.S. economy in which two entities set prices for thousands of businesses that should be competitors. That lack of competition or downward pricing pressure has resulted in out-of-control swipe fees and increases inflation throughout the economy.”

The MPC is urging Congress to act quickly and effectively: “It is crucial for Congress to act swiftly and implement real reforms to bring true competition, transparency and equity to the U.S. payments market.”

National Restaurant Association Supports the Bill

Interestingly, the National Restaurant Association says they’re working with the MPC.

The NRA is also working with other organizations to drum up support for the the Credit Card Competition Act of 2022.

You can read about their support for the bill on their website. Additionally, you can tell Congress to pass the bill here. As it stands currently, no action beyond the bill’s introduction to the Senate on July 28 has taken place.

Image: Pixabay

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