Credit Card Competition Act: A Closer Look at the Swipe-Fee Reform 2a534n

The Credit Card Competition Act is a proposed U.S. law aimed at shaking up the credit card market by forcing the biggest issuers to open their cards to more payment networks. Right now, Visa and Mastercard dominate the market (about 80–83% of volume). Every time a consumer swipes a credit card, merchants typically pay a swipe fee of around 2–3% of the sale. This fee is split between the bank that issued the card (an interchange fee) and the card network (Visa/Mastercard). ers of the bill – including major retail groups like the National Retail Federation (NRF) and convenience store associations – say that high Visa/Mastercard fees drive up costs for small shops and ultimately for consumers. They argue that requiring a second, competing network on each card will introduce price competition and help bring those fees down. 1i6lg

At its core, the Act (first introduced in 2022 and reintroduced in 2023) would direct the Federal Reserve to write rules so that large banks (those with assets over $100 billion) must put at least two payment networks on each credit card, one of which cannot be Visa or Mastercard. For example, a Visa credit card from a big bank might also carry a network like Discover or a newer payment network. At checkout, the merchant could then choose which network to route a transaction through. Proponents compare this to a similar rule already in place for debit cards (the 2010 “Durbin Amendment”), where having two networks has helped hold fees down. The hope is that with multiple routing options, networks will compete on price, service, and technology.

Why It’s Being Proposed: High Swipe Fees and Limited Choice 2d621p

Merchants and trade groups say U.S. credit card swipe fees are outrageously high. According to industry data, U.S. merchants paid a record $111–136 billion in credit card fees in recent years. By comparison, merchants in Europe or Asia pay far less per transaction. For instance, the average swipe fee on a Visa or Mastercard credit sale in the U.S. was about 2.25% in 2024, roughly five to seven times higher than rates in many other countries. These fees are typically the second-largest operating cost for retailers (after labor). Small businesses in particular complain that they have little negotiating power and must simply accept the Visa-Mastercard “take-it-or-leave-it” on every card they honor.

In press releases and statements, ers note that these fees have been rising fast (over 80% increase since 2020 for some sectors). They argue that hidden inflation comes from swipe fees – fees add to merchants’ costs which often filter down into higher prices for goods and fuel. Surveys cited by ers claim the average U.S. household effectively pays over $1,000 per year in higher prices due to credit card fees, even if they don’t all swipe cards themselves.

Key facts about the problem:

• U.S. credit card networks (Visa/Mastercard) control ~80–83% of transactions.
• Swipe fees (interchange + network fees) averaged 2–3% of each sale (about $2–3 on a $100 purchase).
• In 2022 alone, Visa, Mastercard and issuing banks collected roughly $93 billion from U.S. merchants in credit card fees.
• Merchants say those fees inflate prices on everything from groceries to gas. A convenience store trade group points out that for many stores, swipe fees now exceed their entire pre-tax profit.
• Many industry groups have been lobbying Congress to cut these fees. The Credit Card Competition Act is one of the top legislative proposals in this area (often lumped in with broader “credit card reform 2025” talks).

How the Act Would Work: Mandating Two Networks on Big Banks’ Cards 3evo

If ed, the law would give the Fed’s Board of Governors new authority to regulate credit card networks. In practical , covered issuers (big banks) would have to embed at least two different payment networks on each credit card. One network would be the usual Visa or Mastercard, and the other would be an alternative (for example, a smaller network, a network owned by a merchant coalition, or even a government-regulated system). American Express and Discover would be exempt from adding another network (since they are themselves both a network and issuer), but AmEx/Discover could serve as the secondary network on other banks’ cards if chosen.

Once two networks are on a card, a merchant paying at the or online terminal could choose which network to send the transaction through. In theory, if one network charges lower fees or offers better service, more merchants would route through it, pushing other networks to lower their fees to stay competitive. The Act would not force any bank to use a particular network – banks would still pick the non-Visa/MC network based on their own criteria (security, cost, market share), similar to how debit networks are chosen today. The Fed would also publish a list of any networks that cannot be added (e.g., networks that pose national security risks).

Importantly, this requirement only applies to a small number of issuers. All banks and credit unions except the largest (~the top 25–30 by asset size) would be exempt That means most community banks, regional banks and credit unions could continue business as usual. The goal is to target the biggest players who issue the vast majority of Visa/Mastercard cards.

Key proposal details (in simple ):

• Covered banks (assets > $100B) must load two payment networks onto each Visa/Mastercard credit card.
• At least one network on each card must NOT be Visa or Mastercard (i.e., a competing network).
• Merchants would get to pick the routing at checkout, creating network competition.
• The Fed will set rules (within ~3 years) and maintain a safe-list of networks (blocking any with security issues).
• AmEx/Discover cards are largely unaffected, and small issuers (and all debit cards) are mostly unchanged.

Potential Benefits: Lower Fees and More Competition 4h6i3g

ers’ View: Retailers, trade groups and some lawmakers argue that this Act could lower swipe fees and ultimately help consumers. Their arguments include:

• Lower operating costs for merchants. If payment networks start competing on price, merchants might pay less per swipe over time. Lower fees could relieve pressure on small businesses, letting them invest in growth (hiring, inventory) or offer more stable prices.
• Potential price relief for shoppers. In the best case, merchants would along some savings to customers through lower prices. Groups like the Merchants Payments Coalition say lower fees could translate to cheaper goods, or at least slower price increases.
• More network choice and innovation. Requiring two networks is intended to spark innovation among payment processors. Just as having two internet providers might improve service and cost, having two card networks might drive improvements in security, speed or additional services.
• Small retailer . National retailers aside, independent stores and gas stations back this idea because they currently pay a higher percentage fee than Walmart or Amazon (who negotiate better deals). For example, the NRF notes that small shops have “no choice” but to pay big banks’ set fees, so competition could level the field.
• No immediate change for consumers’ habits. Importantly, if the bill es, consumers wouldn’t have to change how they use cards. You would still swipe or tap as usual. The change happens behind the scenes in processing.

ers often cite projected savings. For instance, the NRF has estimated that more competition in card networks might save U.S. businesses and shoppers on the order of $15 billion per year. It also highlights polling data showing a large majority of consumers want lower fees. While such figures are debated, they underscore the expected payoff if fees do come down.

Concerns and Criticisms: Rewards, Complexity, and Who Benefits 6y422r

Not everyone agrees this Act is a win. Banks, credit unions and industry groups raise several objections:

• Possible impact on rewards programs. The biggest credit card rewards (points, miles, cash-back) are funded by interchange fees. Many experts warn that if swipe fees shrink, credit card issuers may cut back on rewards to make up the difference. A banking analyst notes that multiple network structures could reduce the revenue banks earn per transaction, leaving less to fund perks. Critics compare it to the 2010 Durbin Amendment on debit cards: after debit networks were deregulated, debit card rewards mostly disappeared. Consumers who prize travel points or cash-back might find fewer bonus offers or higher fees.
• No guarantee of lower consumer prices. Opponents argue merchants aren’t required to lower prices even if their costs drop. Large retailers could simply keep the extra profit. The Electronic Payments Coalition (a trade group for banks/networks) notes that big-box stores have not historically ed savings to shoppers. Skeptics say this could just redistribute revenue (from Visa/Mastercard to Walmart/Target) without benefiting consumers.
• Increased complexity and compliance costs. Implementing two networks and keeping up with Fed regulations will cost banks and payment processors time and money. Smaller banks might not face the mandate, but all banks will have to adjust ing and system integrations. Some argue this will raise costs for issuers that could be ed back as higher cardholder fees.
• Security and consumer choice concerns. Some critics (like credit union CEOs) claim that adding untested networks could put consumer data at risk. They worry consumers will lose the choice of using their preferred rewards card if retailers steer them to the network the merchant prefers. Retailers choosing the network might “erase consumers’ choice and any expected reward points during transactions,” an industry leader has warned.
• Who really benefits? Some opponents say the big winners would be very large retailers (Amazon, Target, etc.) that can negotiate with new networks. Small and mid-size merchants might not see much difference in their bottom lines. The concern is that policy-makers are effectively “bailing out greedy retailers,” to quote a credit union lobbyist, without clear proof it will help families.

Summary of the debate (pros & cons):

• Pros: Potentially lower merchant processing fees; added network competition; from small businesses; bipartisan backing (Senators Durbin D-IL and Marshall R-KS are co-sponsors). Could save merchants/consumers ~$15B/year if fully effective.
• Cons: Risk of reduced rewards/benefits for cardholders; no enforcement that lower fees go to lower prices; additional regulatory burden on banks; critics say it’s an unproven mandate that may not produce promised savings.

Ultimately, it’s a debate over credit card regulation: should the government intervene to break up a duopoly and drive down fees, or should market forces (and consumer choice) prevail? Proponents stress relief for inflation-hit businesses and shoppers; opponents warn of unintended consequences on rewards and banking services.

Impact on Rewards and Your Wallet 4o6441

A key question for many readers is: What happens to credit card perks and everyday spending?

• Your spending habits won’t change. You’ll still swipe or tap your Visa/Mastercard as usual. There’s no new card to sign up for, and merchants must accept the same plastic.
• Rewards programs could change. With potential pressure on the revenue stream for credit cards, banks might reduce bonus points, airline miles, and cash-back offers. Early analyses (like by Mercator Advisory Group) say, “Will consumers lose? Probably” – suggesting rewards may be trimmed if fees fall. For example, a card that once offered 3% cash back might go down to 2% or drop travel perks.
• New perks might emerge. If issuers cut some rewards, they may double down on other benefits to attract customers (lounge access, exclusive offers, travel status). Card companies are likely to innovate to keep customers engaged.
• Price changes at stores are unclear. Some small stores might try lowering prices or keeping them flat if they save on processing costs. Others may invest savings in growth (more stock, more staff). But regulators are not mandating any price cuts. It’s possible you might not see immediate discounts, but proponents hope long-term competition will ease inflationary pressure on goods.

Frequently Asked Questions 373u32

• Does this law ban credit card rewards or endpoints? No. The Act itself does not outlaw rewards. However, it is widely expected that if banks earn less from swipe fees, they might voluntarily trim their rewards budgets. The law directly regulates networks and fees, not reward programs. Ultimately, any change to rewards would be a business decision by card issuers facing lower fee income.
• Will using my credit card get harder or different? For day-to-day use, nothing changes. You will keep using your cards normally. The only difference is on the back end: the transaction may route through a different network you’re not aware of. Consumers shouldn’t need to install new apps or change how they pay.
• How soon could this happen? The Act is still a proposal. As of 2025, it hasn’t ed Congress. Sponsors have tried to attach it to must- bills (like the Defense spending bill or a stablecoin bill), but it hasn’t been finalized yet. If it does become law, the Federal Reserve would have up to a few years to issue regulations and for banks to comply. It would likely be 2026 or later before any changes take effect.
• Who s or opposes it? Merchant and retail groups strongly it. The list of backers includes the National Association of Convenience Stores, National Retail Federation, restaurant and franchise groups, and large retailers themselves. On the other side, major opponents are bank and card industry coalitions (Electronic Payments Coalition, American Bankers Association, and others) as well as credit unions. They argue it’s a bad idea for consumers and the banking system.
• What can I do about it? Ordinary consumers have limited role, but you can stay informed. If you want to voice your opinion, both ers and opponents have tools for . For example, the merchants’ coalition and banks’ coalition have websites calling for grassroots action. You could also your of Congress to express or concern about how this bill might affect you or your local businesses.