President Donald Trump has endorsed a bill by U.S. Senator Dick Durbin to reduce credit card swipe fees, which can be as high as 4% of the transaction amount. Durbin argues that these fees are burdening American consumers, especially during challenging economic times. The Credit Card Competition Act, co-sponsored by Senator Roger Marshall, aims to introduce more competition in the credit card market, potentially lowering swipe fees for consumers.
According to Durbin and Marshall, the average family pays nearly $1,200 annually in swipe fees. However, banking and credit union groups have raised concerns that their proposal might compromise transaction security and eliminate valuable credit card rewards programs. Jonathan Capitanini, owner of the Italian Village Restaurant, highlights the significant impact of swipe fees on small businesses, stating that his restaurant spent over $200,000 on swipe fees last year, equivalent to three cents on the dollar.
Trump's support for the bill was expressed on his Truth Social platform, where he urged his followers to back the Credit Card Competition Act, emphasizing the need to stop the 'out-of-control Swipe Fee ripoff.' The legislation would mandate that large banks with over $100 billion in assets allow at least two unaffiliated card networks, including one outside Visa and Mastercard, which currently dominate the market. This move could reduce swipe fees but might also reduce banks' revenue from credit card transactions.
Despite Trump's endorsement, it's worth noting that Illinois has already enacted a law addressing swipe fees. Governor JB Pritzker signed the Illinois Interchange Fee Prohibition Act in 2024, prohibiting interchange fees on sales and tips. However, banks and credit unions have challenged the law in court, arguing that it could disrupt the existing global payments processing system, which they claim is safe, secure, and efficient.
The future of this legislation remains uncertain, with the court battle ongoing. Sam Toia, president of the Illinois Restaurant Association, emphasizes the dilemma faced by restaurants, which must decide whether to absorb the costs or pass them on to customers. With the average independent restaurant in Chicago generating only 3 to 5% pretax profit, the impact of swipe fees could be significant.
Additionally, Trump has proposed capping credit card interest rates at 10% for a year, a move that has drawn swift reactions from Wall Street. Bank executives warn that this proposal could have more negative economic consequences than positive ones.
