Senators Roger Marshall, M.D. (R-KS) and Dick Durbin (D-IL)  reintroduced the bipartisan, bicameral Credit Card Competition Act, legislation that would enhance competition and choice in the credit card network market, which is currently dominated by the Visa-Mastercard duopoly.  The bill would direct the Federal Reserve to ensure that large credit card issuers offer a choice of at least 2 networks for processing electronic credit transactions. 

The goal is to reduce "swipe fees" (interchange fees) charged to merchants by allowing transactions to be processed over at least one network other than Visa or Mastercard. The bill requires banks with assets over $100 billion to allow credit card processing through at least two unaffiliated networks.

The objective of the Credit Card Competition Act is to inject a healthier level of competition into the credit card market, thereby reducing the prevalence of the junk fees we previously mentioned. Banks must ensure that at least one card network is available to merchants other than Visa or Mastercard. Theoretically, this would create new competition by expanding the options available to merchants. Since they wouldn’t be forced to choose between Mastercard and Visa, these card networks would have a more challenging time staying competitive while relying on junk fees. Bill sponsors claim that consumers and businesses would save up to six billion dollars in the plan’s first year.

President Trump, in a Truth Social post this month, urged Congress to pass the “Credit Card Competition Act” (S. 3623), which would require banks with more than $100 billion in assets to offer retailers multiple routes to process credit card transactions, potentially bypassing Visa Inc. and Mastercard Inc.’s dominant networks and reducing banks’ revenue from swipe fees.

Bank and credit union trade groups have for years furiously lobbied against the legislation, and their opposition is only ramping up after Trump’s social media post. The industry associations are urging members to call their representatives and releasing studies claiming the bill would eliminate popular credit card rewards while only benefiting big-box retailers.

However, Bill Sponsors Argue: “When it comes to Main Street vs. Wall Street, I’ll stand with Main Street businesses, who are the backbone of our economy, every single time,” said Sen. Marshall.  “At a time of economic uncertainty and skyrocketing inflation, these credit card companies are increasing their hidden swipe fees and price gouging small businesses and consumers.  Our legislation would rein in the big banks and the credit card industry, drive down costs for convenience stores, gas stations, and other small businesses, and ultimately pass those savings down to consumers.  This legislation is the right thing to do, and I am proud to reintroduce it with bicameral and bipartisan support.”

“Credit card swipe fees inflate the prices that consumers pay for everyday purchases like groceries and gas. It’s time to inject real competition into the credit card network market, which is dominated by the Visa-Mastercard duopoly,” said Sen. Durbin. “This legislation, which builds upon pro-competition reforms Congress enacted in 2010, would give small businesses a meaningful choice when it comes to card networks, and it would enable innovators to gain a foothold in the credit card market. Bringing real competition to credit card networks will help reduce swipe fees and hold down costs for Main Street merchants and their customers.” 

Critics argue that the bill represents undue government interference in the free market. They believe that the credit card market should be left to operate without legislative intervention, allowing competition to naturally regulate fees and services.   While merchants might save on interchange fees, there is no guarantee these savings will be passed on to consumers through lower prices. Merchants could choose to retain the savings to increase their profit margins instead.

In addition, smaller banks and credit unions might struggle to compete with larger issuers if they are forced to lower their interchange fees, potentially leading to a consolidation in the market and less competition overall.  The reduced income from interchange fees could make it economically challenging for smaller issuers to maintain their credit card offerings, potentially driving them out of the market.