While voters are focused on a vast array of issues these days, nothing seems to shake Americans’ concerns with inflation and affordability. That’s why President Trump’s recent endorsement of the Credit Card Competition Act deserves the utmost attention from everyday consumers and, more importantly, their representatives in Congress. The president’s support shows he is critically aware of the damage done by exorbitant credit card swipe fees as they drive up the price of nearly all goods and services.
That’s because swipe fees are charged as a percentage of a total transaction amount, averaging about 2.35% and quickly climbing. Since 2010 the amount of swipe fees paid has more than quadrupled and, after labor costs, swipe fees are commonly cited as business owners’ second highest operating expense.
If passed, the CCCA is estimated to save merchants and consumers an estimated $17 billion in the first year alone. This enormous sum of revenue left to local economies and small businesses who earned it in the first place would free up funds to improve wages, expand benefits, and lower prices for consumers. Instead, the current system has driven many merchants to the brink, forcing them to pass these fees onto consumers in the form of higher prices – or risk closing their doors for good.
The average American family now spends close to $1,800 more each year through increased prices as a result of swipe fees. What’s worse, these fees act as inflation multipliers because swipe fees are charged as a percentage. Increased costs heighten the cost of swipe fees, which forces businesses to raise prices again. This never-ending cycle is what allows Wall Street to siphon billions away from everyday Americans.
However, this system is all by design. Visa and Mastercard have essentially rigged the payments industry to eliminate competition and amass over 80% of the market share. That control has also allowed them to dictate a schedule of rising swipe fees that major banks agree to in order to avoid competing with each other for lower rates. This cartel-style price-fixing scheme cuts out any negotiation with Main Street and creates a system devoid of competition and stagnating service improvements.
Under the status quo, life is only becoming more expensive for small business owners and consumers at the same time financial executives like JP Morgan Chase CEO Jamie Dimon earned over $770 million last year. And banks like Goldman Sachs and Morgan Stanley are seeing record profits this year.
Fortunately, President Trump, along with an overwhelming majority of Americans and a bipartisan coalition in Congress, have had enough. The CCCA would finally break the iron grip these two companies have held on the market by allowing merchants to choose from at least two different networks when processing a credit card transaction. This simple change would mean alternatives like Shazam and Pulse, already operating secure and efficient networks in the debit space, would have the ability to compete. A truly competitive industry would encourage Visa and Mastercard to lower their rates to a reasonable level and improve their services in order to maintain an edge.
The CCCA would apply only to financial institutions with over $100 billion in assets, ensuring its provisions would target bad actors currently exploiting the system. Meanwhile, smaller banks and local credit unions that know their communities best would be left untouched.
President Trump has long had his finger on the pulse of what Americans care about most, and high prices is at the top of the list. I’m grateful to the president and a bipartisan group of lawmakers from both the House and Senate who are taking the affordability crisis seriously. Very few pieces of legislation can bring together Democratic lawmakers like Sens. Dick Durbin and Peter Welch and Rep. Zoe Lofgren with Republican lawmakers like Sen. Roger Marshall, Rep. Lance Gooden, and President Trump. When we achieve rare moments of bipartisan consensus, that alone should be all the evidence Congress needs to pass the CCCA and send it to President Trump’s desk for his signature.
