OPINION: Credit card act would break 'big bank' swipe fees

By Michael Sanchez

In a climate where Wall Street megabanks continue to reap enormous profits, it is high time for our elected representatives to step in and address the pressing issue of rising credit card swipe fees by supporting the passage of the Credit Card Competition Act.

This bill holds the potential to rectify an unbalanced system that sees massive banks profiting at the expense of everyday consumers and Main Street merchants in communities across the state. The data is irrefutable: the credit card industry, dominated by a few major players, has systematically imposed exorbitant swipe fees that are taking a toll on both consumers and small businesses, to pad their bottom lines.

Swipe fees, which currently average 2.24% of each transaction, have more than doubled over the past decade and surged by 50% since the onset of the pandemic, reaching a record $160.7 billion last year. This translates to paying an additional $1,000 per year for the average American family. It’s no surprise with these rising costs of goods that we are seeing the highest amount of credit card debt in history — another big win for the financial giants at the expense of everyday Americans.

These escalating swipe fees are a clear sign of a broken system and an unfair marketplace. Visa and Mastercard, who control over 80% of the market, wield tremendous power in setting the swipe fee rates charged by banks. Both of these companies partner with a multitude of credit card-issuing banks. This lack of competition results in merchants having to shoulder higher operating costs, which are inevitably passed on to consumers in the form of inflated prices.

The Credit Card Competition Act aims to break this stranglehold by requiring the biggest banks with assets of at least $100 billion to enable cards to be processed over at least two unaffiliated networks, promoting competition and saving merchants and customers here in New Mexico more than $72 million of the nearly $440 million in swipe fees they’re currently paying.

The benefits of this legislation extend beyond mere cost savings. Fraud prevention is another crucial aspect, as the Federal Reserve has attested that competing networks have just one-fifth the fraud rate compared to Visa and Mastercard’s networks. It’s a win-win situation — lower fees for merchants and consumers and enhanced security for everyone.

It’s important to note that the proposed Credit Card Competition Act would not disrupt the credit card rewards system or consumers’ card usage habits. Community banks and small credit unions would also be exempt from its provisions, ensuring they can continue providing vital financial services to their communities without undue interference.

In the face of these compelling reasons for reform, Sens. Martin Heinrich and Ben Ray Luján must lend their support to this important legislation. The Credit Card Competition Act enjoys broad public support, with a survey finding that 65% of likely voters favor reform.

The evidence regarding the need for reform is clear and reinforced by public opinion, so it’s time for action. By supporting the Credit Card Competition Act, Congress can help reduce the financial burden on consumers and enhance the overall security of the credit card industry. It’s a win for New Mexico, and it’s a win for the American people.

Michael Sanchez served in the New Mexico Senate from 1993 to 2016 and was the Senate’s Majority Floor Leader.