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A new bill could reduce the fees shop owners are charged when customers swipe a card


Every time you use your credit card, the retailer pays a fee - about 2.25%. Some of it goes to the bank that issued the card, some to the credit card company for processing the sale, and some might go back to the customer as a reward. Retailers complain these swipe fees are much higher in the U.S. than in other countries, but a new bill might change that, as NPR's Scott Horsley reports.

SCOTT HORSLEY, BYLINE: Paying 2.25 cents on every dollar of sales might not sound like much, but it adds up fast. Victor Garcia, who runs a pair of ice cream stores near Fort Worth, Texas, says swipe fees cost him more than $25,000 last year. He's posted signs near the cash register urging customers to think twice before reaching for their credit card.

VICTOR GARCIA: We pay $25,000 in credit card fees. If you have cash on you, we would absolutely love it if you paid with cash today.

HORSLEY: Garcia says most customers have no idea when they buy a scoop of mango ice cream that the credit card companies are taking such a big bite.

GARCIA: Most are shocked. Half of them say, my gosh, I have no cash. I wish I did. People don't know. They just say, hey, I get points, so I'm going to use my card.

HORSLEY: Five years ago, 70% of Garcia's customers paid with cash. Today, it's more like 30%. Credit card use ballooned during the pandemic, and so did the swipe fee bill that merchants have to pay. It's up more than 50% since 2020. Some gas stations and other businesses charge extra for those customers who use credit cards. But Doug Kantor, who's general counsel for the National Association of Convenience Stores, says most retailers just spread the cost around.

DOUG KANTOR: In general, these fees are really just baked into the cost of everything we buy. Even consumers who are cash payers pay more for every good that they buy than they really should.

HORSLEY: Rewards cards typically carry an even higher swipe fee. So customers using cash or debit cards are effectively subsidizing the airline tickets, resort stays and other rewards that go to card users - a $15 billion a year transfer that some have described as Robin Hood in reverse.

KANTOR: It is unfortunately a very unjust system and one that's hidden from most of us. So we really just don't even know that it's happening.

HORSLEY: Swipe fees are set by the Visa and Mastercard networks, and Stanford finance professor Chenzi Xu says they're eight or nine times as high as the fees in Europe, where they're strictly regulated. Some big retailers have the clout to bargain for lower fees. Costco, for example, gets a break for accepting only Visa cards in its stores. But Xu says most retailers have little choice but to pay whatever Visa and Mastercard demand.

CHENZI XU: If you happen to walk in with just a Mastercard, they don't want to give up on your purchase. So the way they deal with these large fees is that they just pass on the prices to their products.

HORSLEY: A bipartisan group of lawmakers is pushing a bill that would require big credit card issuers to allow a network other than Visa and Mastercard to process transactions in hopes the competition would lead to lower fees. Banks and the credit card networks are pushing back. Richard Hunt, who chairs their lobbying group, the Electronic Payments Coalition, calls the proposal government overreach.

RICHARD HUNT: Look, if a merchant doesn't want the credit card, there are other alternatives - cash or checks. But we know America loves their credit cards.

HORSLEY: Victor Garcia knows that, too. He's tried offering a discount for cash at his ice cream stores, and even set prices in whole dollars so customers don't have to juggle change. None of it's made much difference. His swipe fee bill keeps going up.

GARCIA: That's a really hard thing to say, hey, we're going to go out and try to change consumer habits. We kind of stopped. We said, OK, we're going to let that fee be a part of the price.

HORSLEY: Garcia says he backs the credit card competition bill 100%, in hopes of getting swipe fees down from 2.25.

Scott Horsley, NPR News, Washington. Transcript provided by NPR, Copyright NPR.

NPR transcripts are created on a rush deadline by an NPR contractor. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.

Scott Horsley is NPR's Chief Economics Correspondent. He reports on ups and downs in the national economy as well as fault lines between booming and busting communities.