With another holiday shopping season kicking into high gear, it’s not just retailers who will benefit: Credit card companies will collect billions of dollars in fees for processing all those purchases made with plastic.

What You Need To Know

  • Congress is considering the Credit Card Competition Act, a bill that would give every merchant the choice of a second network to process transactions

  • For every purchase made with a credit card, the retailer pays a so-called "swipe fee" of 2-3%; the money goes to credit card companies and the banks that issue the cards to cover their processing and security costs

  • Advocates say competition between payment networks for business would drive down swipe fees, benefiting consumers

  • The credit industry argues that giving merchants a choice in payment networks would not result in significant savings and would leave consumers and businesses vulnerable

For every purchase made with a credit card, the retailer pays a so-called "swipe fee" of 2-3%. The money goes to credit card companies and the banks that issue the cards to cover their processing and security costs.

With Americans using Visa or Mastercard for 80% of their credit card purchases, merchants that accept plastic must pay the swipe fees charged by both companies.

Congress is considering the Credit Card Competition Act, a bill that would give every merchant the choice of a second network to process transactions.

“We're just arguing for a fair and level playing field so that merchants can really have a choice, which they don't right now, between routing their transactions on two different networks so that if they want to, they can choose the network that, in theory would be less expensive in that scenario,” says Stephanie Martz, Chief Administrative Officer of the National Retail Federation.

Martz says the competition between payment networks for business would drive down swipe fees, benefiting consumers. She explained that during the holiday season alone, Americans will pay $21 billion in swipe fees, which amounts to just under $20 per person.

“And it's costing households $1,000 a year right now in additional costs, because of the cost of those swipe fees that retailers have to pass along to consumers,” says Martz. 

Conversely, the credit industry argues that giving merchants a choice in payment networks would not result in significant savings and would leave consumers and businesses vulnerable.

The CEO of the Credit Union National Association, former congressman Jim Nussle, issued a statement earlier this year calling it "reprehensible that at a time when hard-working americans are already feeling the financial pinch from inflation, big box bullies are pushing for financial breaks that would risk both the data security and access to credit for consumers and small business owners.”

And for holiday shoppers looking to rake in credit card rewards, some worry that such benefits would be reduced or disappear entirely if the Credit Card Competition Act becomes law.

The legislation has bipartisan support in both the House and the Senate, and sponsors are hoping it will be considered before the end of the year.

NOTE: This article has been updated to correct the spelling of the name of an interview subject.