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At an Oct. 19 rally in Park City, Kansas, President Trump said Kansas Sen. Roger Marshall is fighting “predatory credit card companies and out of control swipe fees.”
Then Trump made a promise about Marshall’s bill: “Roger’s bill to end these rip-offs will save the typical American over $2,000 a year.” (1)
That’s real money if you’re living on a fixed income. So I went looking for where the $2,000 comes from.
The bill is the Credit Card Competition Act. It would require banks with more than $100 billion in assets to enable at least two unaffiliated networks on their credit cards, including one outside Visa and Mastercard. (2) Marshall reintroduced it with Illinois Sen. Dick Durbin on Jan. 13. (2)(3)
Here’s the twist. The senators’ own announcement says “the average American family pays nearly $1,200 per year in swipe fees.” (2)(3) That’s what families pay in total, not what they’d save.
And Congress’s official bill record shows no action since the Senate bill was referred to the Banking Committee on Jan. 13. (4)
I’ve been a CPA since 1981, so let me referee this one. Trump is right that swipe fees are a real cost that’s hidden in what you pay. But “over $2,000 a year”? Here are 5 things to know before you count on it.
1. Nobody is mailing you a $2,000 check
Swipe fees are charged to the store, not to you. When you pay with a card, the merchant pays a fee, and that cost gets built into the prices everyone pays. (6)
The senators say more competition would help lower swipe fees for small businesses and pass savings on to consumers. (2) So if the bill works as planned, any savings would show up as slightly lower prices at the register, not as a deposit in your bank account.
And here’s the math problem. The bill’s sponsors say the average family pays nearly $1,200 a year in swipe fees. (2)
It’s hard to see how a bill that reduces, but doesn’t eliminate, those fees saves the typical American more than $2,000. That’s my read of their numbers. The transcript doesn’t say where Trump’s figure comes from. (1)
2. Lower fees don’t guarantee lower prices
We’ve seen a version of this movie before. Congress’s last swipe-fee crackdown, known as the Durbin amendment, put limits on debit card fees at big banks.
A 2015 brief from the Federal Reserve Bank of Richmond looked at what happened next, using a survey of 420 merchants. It found that 77.2% didn’t change their prices after the rule took effect, 1.2% lowered them and 21.6% raised them. (5)
The rule it studied covered debit cards, not credit cards, and the survey is more than a decade old. But it’s a good reminder that a fee cut for stores doesn’t automatically become a price cut for you.
Quick gut-check — if your money advice is coming from random online influencers, you’re playing a dangerous game. I’ve been a CPA since 1981 and writing about money since before the internet existed. Sign up for the free Money Talks Newsletter and get expert advice that’s been tested by time.
3. Your card rewards could be part of the trade-off
Card rewards don’t come out of thin air. A 2010 study from the Federal Reserve Bank of Boston found that because merchants raise prices for everyone to cover card fees, people who pay cash effectively help fund the rewards that card users collect. (6)
So if swipe fees fall, I’d expect card issuers to look for ways to make up the lost revenue, and rewards are an obvious place to look. That’s my opinion, not a certainty.
If you pay your card off every month and collect cash back, you may be one of the people who comes out ahead under today’s system. Keep that in mind before you cheer too loudly.
4. The fee that really costs you is interest
Nothing in the senators’ description of the bill touches the interest rate on your card. (2) And that’s where the big money is.
In August, the average interest rate on credit card accounts that were charged interest was 22.36%, according to preliminary Federal Reserve data. (7)
Here’s a simple example. If you carry a $5,000 balance all year and pay only enough to cover the interest, a 22.36% rate costs you about $1,118. That’s almost as much as the nearly $1,200 in swipe fees the senators say the average family pays in a year.
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My honest take
Give Trump his due. Swipe fees are a real cost, they’re built into the prices you pay at stores that take cards, and more competition among card networks is a reasonable idea.
But the $2,000 doesn’t line up with the numbers from the bill’s own sponsors, the bill hasn’t moved since January, and the last swipe-fee crackdown didn’t do much for shelf prices.
So don’t budget for it. If you want real savings, the surest place to find them is your own card balance, not a bill in Congress.
Sources: 1. Roll Call Factba.se; 2. Office of Sen. Roger Marshall; 3. Office of Sen. Dick Durbin; 4. Congress.gov; 5. Federal Reserve Bank of Richmond; 6. Federal Reserve Bank of Boston; 7. Federal Reserve
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