Sen. Roger Marshall was fired up as he stepped behind a lectern in front of the U.S. Capitol this September.
Raising his voice and one finger, Marshall, a Kansas Republican, called for the Senate “for once” to prioritize “Main Street.”
It’s become a refrain for Marshall as, for months, he has been strongly, and sometimes loudly, pushing for Congress to pass a bill targeting credit card swipe fees – the percentage credit card companies get every time someone uses their card to make a purchase.
He has pointed to Casey’s General Store, which has 190 locations in Kansas. It’s paid $17 million in swipe fees this year, Marshall said.
“This is an issue of Main Street versus Wall Street,” Marshall told The Star earlier this month. “Wall Street is capitalizing to the tune of $90 billion dollars a year. So we want some of that money to go back home.”
While portrayed as an effort to help Main Street and drive down costs for both small businesses and consumers, in Washington the battle has largely been driven by lobbyists.
One one side, lobbyists for the banks, who are pushing to kill the bill and keep the existing process for credit card swipe fees. On the other side are lobbyists for retailers, like Home Depot, Walmart, the National Retail Association and the National Grocers Association, pushing to keep more money when they make a sale.
His bill seeks to drive down the percentage banks take from every credit and debit card purchase by promoting competition. The legislation is cosponsored by Sens. Dick Durbin, an Illinois Democrat; Peter Welch, a Vermont Democrat; and J.D. Vance, an Ohio Republican.
There are four major credit card networks — Visa, Mastercard, American Express and Discover. The credit card network, which processes the payment, is often different from the bank that issues the card. If you were to pull out your credit card chances are two brands on the card – the bank that issued it and the credit card network, usually Visa or Mastercard, which make up more than 80% of the market.
November and December are the busiest time of the year for shopping, as Americans prepare for the holidays. Each time you swipe, tap or insert your credit card, there’s a fee. Some of the fee goes to the credit card networks, which process the payments. Some of it also goes to your bank and the store’s bank. The fees are set by the credit card networks.
Under the bill, large banks issuing credit cards would have to allow their cards to be processed by two credit card networks and only one of them can be Visa or Mastercard.
The senators believe this will drive competition, giving merchants more leverage to bring down swipe fees. If fees are lower, they hope those businesses will either lower their costs or hire more workers.
“All they want to do is grab a piece of the action,” Welch said of the credit card companies in September. “Every single time you buy a cup of coffee, every single time you buy a skirt, every single time you get a toy for your son or daughter. It’s got to end.”
But the Electronic Payments Coalition, a group representing large banks and credit agencies, argues that the bill wouldn’t actually help small businesses or consumers.
“The real winners, however, are the same mega-stores like Home Depot, Walmart and Target who pull customers away from Main Street to highway bypasses and strip malls,” said Richard Hunt, the executive chairman of the Electronic Payments Coalition. “The Durbin-Marshall bill will be a windfall for them and it will hurt consumers in the process.”
Home Depot, Walmart and Target have donated a combined $13,500 to Marshall in 2023, between his campaign account and political action committee, according to FEC records. He’s also received $13,000 from the National Retail Association, National Grocers Association and the Retail Industry Leaders Association this year.
The Electronic Payments Coalition points to an earlier effort by Congress — and Durbin — to go after the fees charged by credit card companies.
Durbin was able to get legislation into the 2010 Dodd-Frank financial reform law that put a cap on how much banks could charge for swipe fees on debit cards – limiting it for large banks.
While lowering debit card swipe fees may have helped some businesses, it’s unclear how much they lowered costs for everyday Americans. A 2014 study on the cap for debit card swipe fees found mixed results, with 77% of merchants leaving their retail prices the same after the regulation went into effect and 22% increasing prices.
Credit card companies primarily make their money off of interest and fees. In 2022, Americans paid more than $130 billion in interest and fees to credit card companies, according to the Consumer Financial Protection Bureau.
But the money from swipe fees is typically used to fund programs that give money back to consumers – reward fees.
Lobbyists for the banks and credit card companies have argued that the rewards programs put money back in the hands of consumers and help stimulate the economy. The Electronic Payments Coalition said that in 2020, rewards programs returned $60 billion to consumers.
Hong Ru, a finance professor at MIT, said these programs are more complicated. He said that companies will use enticing rewards – like 5% cashback – while charging high interest rates or fees. He said some people are drawn to the reward program while ignoring high interest rates, risking going deep into credit card debt.
Last year, Americans had more than $1 trillion in credit card debt, according to the Consumer Financial Protection Bureau. The same study found that the people who paid most of the interest and fees for carrying debt from month to month only earned 27% of the rewards from credit card debt. The majority of rewards went to people who paid their bills on time.
And while rewards costs have gone up recently, card issuers generally earn more in interchange fees than they issue in rewards.
“When the government put a regulation on the fee to try to reduce the fees, we don’t see the credit card companies try to reduce the reward programs,” Ru said. “What we see is that they find another way to charge you.”
So far, the push against Marshall’s bill is winning. While Marshall has tried to get it added as an amendment to a larger piece of legislation, those efforts have faltered.And it appears unlikely to get a vote in the final three weeks before the end of the year.
“We’re waiting to see what the agenda looks like and where the opportunities are,” Marshall said.