In this photo illustration, a credit card is used to pay for gasoline on February 07, 2024 in San Anselmo, California. (Photo Illustration by Justin Sullivan/Getty Images)
With the election finally decided, voters undoubtedly had rising prices and pocketbook issues on their minds when filling out their ballots.
Especially in South Carolina, where we suffer from one of the highest inflation rates in the country, it’s critical lawmakers work to drive these costs down.
Unfortunately, these problems are only exacerbated further by financial institutions that continue to raise the swipe fees charged to merchants with every use of a credit card.
Before the current Congress ends, I hope South Carolina’s delegation will work to pass the bipartisan Credit Card Competition Act and lower the swipe fees burdening our economy.
Swipe fees have drastically risen over the last decade due to Visa and Mastercard’s outsized influence over the payments industry.
These two companies control more than 80% of the market share, and that control has allowed them to extort higher swipe fees with virtual impunity while undermining and blocking competitors from challenging them.
A Wall Street Journal report last month found that Visa threatened PayPal with higher fees, undercut a deal between Chase Bank and Costco, and hinted it would stop doing business with Apple if the tech company ever decided to become a competitor in the financial industry.
Plus, Visa and Mastercard schedule swipe fee rates that allow both companies to dictate fees without concern for the merchants and consumers they impact.
These anti-competitive practices and intimidation tactics are akin to the business practices of cartels, further evidenced by the Department of Justice’s lawsuit against Visa over its similar conduct in the debit card market.
Fortunately, a solution already exists if Congress could just pass the Credit Card Competition Act introduced by Sen. Dick Durbin, an Illinois Democrat, and co-sponsored by several Republicans including Vice President-elect J.D. Vance of Ohio.
Polls have found widespread support among likely voters for this legislation, which seeks to fix the excessive swipe fee problem by introducing a hallmark of our economic system to the credit card industry: Competition.
The proposal would provide merchants a choice between a minimum of two different routing networks when processing a credit card transaction.
Instead of mandating a fee structure, Visa and Mastercard would have to compete for business, incentivizing them to lower their swipe fees, improve their security and fraud protection measures, and fine-tune other services.
Otherwise, business owners might choose to use alternative networks with cheaper fees and better services.
With lower swipe fees, merchants will have more room in the budget to afford improvements to their business, better wages, and lower prices for consumers.
Because swipe fees are charged as a percentage of a total transaction, they often force businesses to raise prices across the board.
By driving them down to a more reasonable rate, merchants would feel less pressure to raise prices and save consumers who paid an average of $1,100 last year in higher prices as a result of swipe fees, according to the Merchants Payments Coalition.
Passing the bill would also bolster South Carolinians’ financial security against nefarious foreign actors.
Certain state-owned credit card networks, like the China-owned UnionPay, pose a very real threat to national security, yet they’re currently available to American banks should they choose to enable their services.
The Credit Card Competition Act would ban networks like UnionPay that pose a threat to national security, adding an extra layer of protection for Americans’ financial data against our number one foreign adversary.
The proposal is pro-competition, pro-business, and keeps threats from abroad away from our sensitive financial information. With Congress back in session, I hope they’ll deliver on the message sent by voters, alleviate rising prices, and pass the bill.