Credit Card Competition Act: What Are Credit Card Fees? | Opinion


Utah is home to some of the highest credit card debt rates in the country, ranking among the top 20 states in terms of the amount of credit debt carried by residents, according to a new report.

The WalletHub Survey found Utahns carry an average of $2,225 in credit debt. A separate reportmeanwhile, showed that the state’s average consumer debt is well above the national average at $114,293.

Although worrisome, spiked credit balances are not exclusive to the Hive State. Americans across the United States are now borrowing more than ever, with credit user balances on the rise $46 billion in the second quarter of this year. That 13% spike from 2021 is the biggest year-over-year increase in two decades, underscoring the fact that Americans are borrowing more to meet higher prices.

But inflation is not the only factor driving these higher costs.

A recent increase of $1.2 billion in credit card swipe fees imposed by Visa and Mastercard is likely to raise the price of everything from baby diapers to gas at the pump. These hidden fees jumped 25% last year to a record high $137.8 billion for credit and debit cards combined, more than double the amount of the last decade.

For retailers, sweeping fees are typically the most expensive operating cost after labor. An increase in these fees forces merchants such as convenience store or grocery store owners to raise their prices in order to cover higher overhead costs. Because swipe fees are based on a percentage of the total transaction, Visa, Mastercard and major banks kill inflationary prices.

Swipe fees have increased dramatically over the past few years due to the lack of competition in the credit card industry. Visa and Mastercard control 80% of the market and set the prices for fees charged by their card-issuing banks. Instead of competing to offer merchants the best fee rate, the big banks force retailers who accept these credit cards to pay centrally set fees. This take-it-or-leave-it practice has caused many business owners to sue accusations violations of antitrust laws.

Utah Senator Mike Lee is paying attention. During a Senate Judiciary Committee hearing in May, Lee pressed Visa and Mastercard executives and describe their price-fixing as “anti-competitive cartel behavior”. Others, like Ranking member Chuck Grassley, R-Iowa, said the fees “eat away already tight margins, especially for small business owners.”

Last month, Sens. Roger Marshall, R-Kan., and Dick Durbin, D-Ill., Featured bipartisan legislation solve this problem by introducing competition in the payments market. The bill, named the Credit Card Competition Actwill require the nation’s largest banks to have multiple processing networks for credit card transactions, allowing merchants to choose which network they want to use, forcing them to compete for the lowest swipe fee rate .

This means that Visa and Mastercard will have to consider a merchant’s preference for lower fees, just as any other business must when pricing goods.

In particular, this rule will not apply to community banks. The bill excludes banks with less than $100 billion in assets, meaning smaller banks will have a greater opportunity to break into the credit card issuing market while large Wall Banks Street will have to compete for customers. Considering that no Utah bank comes close to this threshold, none of our state’s local banks will be adversely affected by this legislation – but consumers in the state will still benefit.

As Utahans grapple with some of the highest credit card debt in the nation and businesses suffer from record inflation, it is imperative that our leaders do all they can to provide relief. Given Lee’s recent scrutiny of Visa and Mastercard, I hope he signs the Credit Card Competition Act to help skyrocket credit card fees.

Symone Hearst is a business development officer for the banking and credit union industry.


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