Americans have accumulated $1.14 trillion in credit card debt, according to Lending Tree. That’s up from about $890 billion in 2020, a 57.3% increase over that time, the Federal Reserve Bank of New York reports.
Much of that increase comes from swipe fees charged to consumers and merchants by credit card companies, something that a bipartisan piece of legislation in Congress seeks to address.
“Overall swipe fees hit a record $172 billion last year and are most merchants’ highest operating cost after labor, driving up prices by more than $1,100 a year for the average family,” J. Craig Shearman of the Merchants Payments Coalition said in a news release.
In April 2022, during the height of 40-year-high inflation, Visa and Mastercard increased swipe fees, which are based on transactions, by $1.2 billion despite calls from a bipartisan group of U.S. senators not to do so. The senators argued that the increase would worsen already severe inflationary pressures, as swipe fees increase with inflation.
During a Senate Judiciary Committee hearing on excessive swipe fees, National Association of Convenience Stores General Counsel Doug Kantor called attention to a 2022 Visa earnings call during which Visa CFO Vasant Prabhu said that inflation was “beneficial” to the company, the National Retail Federation reported.
As of June 2024, 214.9 million Americans had at least one credit card in their name, according to Capital One Shopping Research. American consumers pay for 62.6% of in-store and online retail purchases with a credit card, and in 2023, Americans spent an estimated $5.20 trillion in credit card purchases.
The Merchants Payments Coalition last month reported that swipe fees could increase the cost of back-to-school and back-to-college supplies by $2.83 billion this fall.
A bipartisan piece of legislation in Congress would create more competition in the credit card industry and bring such fees down, supporters argue.
The Credit Card Competition Act “would require the largest credit-card issuing financial institutions in the country – those with assets over $100 billion – to enable at least two credit card networks to be used on their credit cards instead of just one, and at least one of those networks must be a network other than the Visa/Mastercard duopoly,” a summary of the act from U.S. Sen. Dick Durbin, D-Illinois, says. “In other words, after a transition period during which the Federal Reserve would write implementing regulations, the giant banks that issue the overwhelming majority of Visa and Mastercard credit cards would have to choose a second competitive network to go on each card, and then a merchant would get to choose which of those networks to use to process a transaction.”
While many banks oppose the proposed legislation, a recent survey by the Merchants Payments Coalition found that a majority of Americans support the Credit Card Competition Act.
“According to the survey, 55% of likely voters in this fall’s general election support the CCCA while only 7% oppose it, and 38% are unsure,” a news release accompanying the survey says. “Supporters outnumber opponents by nearly 50 percentage points.”
Support in Congress for the measure remains uncertain, however, after U.S. Sen. and GOP vice presidential nominee J.D. Vance cooled on it.
