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Swipe fees are percentages of a transaction on a debit or credit card charged to the retailer by the card issuer. These fees are the second largest business expense for most retailers, falling behind only labor costs. Some estimates predict that retailers will pay $160 billion in swipe fees in 2023. Due to the mounting cost of swipe fees, they are increasingly on the mind of both c-store retailers and industry organizations, such as NACS. As 2023 comes to an end, we’ve put together a comprehensive guide to the year in swipe fees.
Because Visa and Mastercard control about 83% of the card volume in the United States, retailers are forced to accept their cards and pay the swipe fees they charge. In March, the U.S. Court of Appeals for the Second Circuit upheld a monetary settlement in a class action lawsuit brought by retailers against Visa and Mastercard. The suit alleged that Visa and Mastercard charged excessive swipe fees and violated antitrust laws because retailers have no option but to accept Visa and Mastercard cards. The ruling awarded $5.6 billion to a class of more than 12 million retailers who qualify under the settlement.
In June, eight members of the House and Senate came together to introduce the Credit Card Competition Act to Congress. The legislation seeks to add competition to the card processing sphere, hoping it will in turn drive swipe fees down and break up a monopoly held by Visa and Mastercard. Similar legislation already exists for debit cards.
In 2010, an amendment was added to the Dodd-Frank Wall Street Report and Consumer Protection Act to limit fees charged by debit card processors. This amendment is known as the Durbin Amendment because it was proposed by Senator Richard Durbin of Illinois, who is one of the main sponsors of the Credit Card Competition Act. Durbin has repeatedly introduced the Credit Card Competition Act to Congress in hopes of reducing swipe fees for retailers and drive prices down for consumers, who often have swipe fees passed onto them via increased prices. Opponents to the bill say that regulating swipe fees more would eliminate credit card bonus programs and be worse for consumers.
In July, NACS called on retailers and industry advocates to contact their senators and encourage them to vote in favor of the National Defense Authorization Act, which contained the Credit Card Competition Act. While Congress continues to work to pass the NDAA, a defense spending bill that is passed every year, the Credit Card Competition Act is no longer part of the package. However, many legislators, such as Senators Roger Marshall of Kansas, Peter Welch of Vermont, and J.D. Vance of Ohio, are offering bipartisan support of the bill.
In December, the claims process for the class-action lawsuit against Mastercard and Visa officially began. The appeals court began sending claim notices to eligible retailers, who are allowed to file a claim to their part of the settlement amount until May 31, 2024. Generally, merchants who accepted Visa or Mastercard branded cards from January 1, 2004 to January 25, 2019 are eligible to receive money as part of the settlement, though the official settlement website offers more details. Payout amounts depend on the number of claimants, though the overall amount to be paid by Visa and Mastercard is $5.6 billion.