Retailers claim credit card swipe fees are driving inflation

Although inflation has eased since peaking in 2022, retailers say that credit card swipe fees are not helping to lower inflation.
The National Retail Federation sent a letter this week to the Senate Judiciary Committee urging congressional action to limit credit card swipe fees.
For every transaction involving a credit card, a business is charged a fee.
suggests that in 2022, credit card companies collected $160 billion in swipe fees.
The report indicates that credit card companies generally take around 2% of a transaction.
One reason for this is far more transactions are performed by using credit cards. In 2015, there were 33.7 billion credit card transactions that accounted for $3.05 trillion in sales. By 2021, that number increased to 51.1 billion transactions accounting for $4.88 trillion.
Another reason swipe fees are increasing is credit card companies are in an arms race to offer their customers rewards, such as airline miles, gift cards and cash back. While credit card companies have other forms of income from customers who carry balances, such as late fees and interest, transaction swipe fees are a way for companies to compensate customers who take advantage of cash-back offers but don’t carry a balance.
Visa and Mastercard control about 80% of the credit card market. The National Retail Federation is calling for greater competition.
“The current credit card system has been designed by the Visa-Mastercard duopoly to maximize profits for the networks and the nation’s largest credit card issuers while forcing merchants and their customers to pay excessive fees without any recourse to help bring these costs under control,” NRF Senior Vice President for government relations David French said. “This market failure requires action by Congress.”
French added that swipe fees “are adding inflationary pressure to the U.S. economy and prevent retailers and other merchants from growing their businesses.”
A bipartisan group of senators, including Vice President-elect JD Vance, were among the lawmakers who introduced the Credit Card Competition Act. The bill “would direct the Federal Reserve to ensure that giant credit card-issuing banks offer a choice of at least two networks over which an electronic credit transaction may be processed.”
“Interchange fees put a brutal strain on our small businesses, but because of the Visa-Mastercard duopoly in the credit card network market, Main Street businesses have no choice but to pay these crushing fees or risk going under,” said Sen. Peter Welch, D-Vermont.  “The Credit Card Competition Act will restore choice and competition in the credit card network market, helping to bring down costs for small businesses and making it easier for these essential businesses to thrive.”
CEOs for the credit card industry were invited to a hearing earlier this year to testify on the Credit Card Competition Act but had not accepted an invitation.