Utah would benefit from the Credit Card Competition Act

November 5, 2023 11:55 am
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Over 325,000 Utahns get out of bed every day and go to work at retail. Utah retailers pay $10.6 billion annually in wages to Utah families and have a direct impact on our Utah economy of over $15 billion each year. All this economic activity is facing a growing threat: high credit card “swipe fees.”

You see, businesses pay a swipe fee every time a customer uses a credit card to make a purchase. These fees — which amount to roughly 2 to 3% of every purchase — may seem inconsequential at first glance. But when added up, they amount to billions of dollars being siphoned away from American businesses each year. This hidden cost not only squeezes business budgets but also increases the prices consumers pay for goods and services.

For example, an independent family-owned grocery store company with 20 locations paid over $12 million in swipe fees last year alone — an expense that has ballooned to its third largest business expense, and is a hidden cost that is partially passed on to consumers. In total, businesses paid nearly $130 billion to cover credit card swipe fees in 2022 — a 20% jump compared to the year before.

The key issue is Visa and Mastercard’s stranglehold over the credit card industry. The credit card giants have leveraged their roughly 80% control of the market to more than double swipe fees over the past 10 years. The duopoly position gives business no other choice but to swallow the inflated costs. Now, Visa and Mastercard are gearing up to make a bad situation even worse. While Utahns have been wrestling with record inflation, in October, Visa and Mastercard raised credit card fees again. This time, by an additional $502 million annually.


Fortunately, there is hope on the horizon: the Credit Card Competition Act. The proposed bipartisan federal legislation that is currently being considered in Congress aims to rein in swipe fees by leveling the playing field with free market competition. The bill would give businesses more options on how to process credit card transactions — forcing credit card companies to compete for a merchant’s business.

If passed, it would promote transparency, lower swipe fees and empower businesses to negotiate more reasonable rates. Free market competition works in most other areas of the U.S. economy; why should the credit card business be any different? It’s predicted the move would save businesses and consumers up to $15 billion per year.

Critics argue that reining in swipe fees would mean consumer rewards programs would disappear. This is a myth pushed by the credit card companies and big banks to scare Americans into opposing the legislation. Points lovers can rest easy. An analysis from CMPSI estimates savings associated with the Credit Card Competition Act will have a minimal effect on rewards per dollar spent.

The Utah business community has been struggling to grapple with an economy plagued by inflation over the past two years. Now, our elected leaders in Washington have an opportunity to support legislation that would foster free market competition, lowering prices for small businesses and consumers alike. It’s not just good for main street retailers, it’s good for Utah.

Dave Davis is president and chief executive officer of the Utah Retail Merchants Association, a trade association representing retailers across the state of Utah.

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