How Credit Card Swipe Fees Are Impacting Retailers


Even after a recent proposed $30BN settlement which aimed to lower merchant fees from Mastercard and Visa, the former still increased transaction fees last month. Between these fee increases and the settlement being far from approved, businesses may only see literal pennies on the dollar in savings in the short term.

“Most card networks publish their interchange rates twice a year, in April and October. These fees are designed to cover the costs of processing and authorizing credit or debit card transactions,” explains Eric Cohen, CEO and founder of Merchant Advocate. “An increase can occur due to several factors, all of which are weighed to determine appropriate interchange rates. These factors include operating costs, competitive landscape, regulator changes, etc.”

Credit Card Swipe Fees Hit $100 Billion in 2023

Earlier this year, The Merchants Payments Coalition stated that American merchants were charged $7.5 billion more for credit cards with Visa and Mastercard logos in 2023 than they were in 2022 – for a total of $100.77 billion. This was the first time in history that Visa and Mastercard credit card swipe fees surpassed the $100 billion mark.

“Mastercard has raised multiple fees recently, including its assessment fee, which went from 0.13% to 0.14% on April 15th,” says Cohen. “This fee – which goes directly to Mastercard – applies to all credit, debit and prepaid card transactions. This assessment fee increase is only a fraction of a percent but amounts to an annual increase of $259.1 million in paid fees based on Mastercard’s transactions in 2023.”

How the Fee Increases Are Impacting Consumers and Retailers

All of these fees add up over time, making it overwhelming for merchants looking to improve their margins. It also means prices continue to go up for consumers, adding to their already inflated cost of living. 

“The fees will mean higher credit card processing costs for merchants every month, which can and will add up over time. Many merchants pay hundreds or thousands of dollars in credit card processing fees every year and it can be the difference between breaking even, turning a profit or going under,” Cohen explains. “Nowadays, consumers are also taking the heat from rising fees as the fees get passed onto them – whether through raised prices or credit card surcharges on their bills. In the end, both consumers and merchants are paying more for the same products and services.”

Cohen predicts these fee increases will continue to take place over the next year. Even though Visa and Mastercard agreed to the $30 billion settlement to lower swipe fees, it still leaves avenues for them to raise rates on other line items like their assessment fees. 

“While the various fees are for different services, for example interchange fees go to the card-issuing bank while network fees go to the network, all increased fees put more financial strain on the merchant,” says Cohen. “Unlike processing fees, network fees are regulated, but the increase still impacts merchants who must pay higher fees to continue accepting credit card payments.”

A Possible Solution

Last year, the Credit Card Competition Act was introduced to Congress, which would address network access and competition in credit card transactions. The bill sponsors’ stated goal is to increase competition in the credit card industry with the hope of reducing expenses for merchants during the credit card transaction process.

“The act would require the largest credit card-issuing banks to enable at least two credit card networks to be used on their cards instead of just one, and one of those networks must not be Visa or Mastercard,” Cohen states. “This will allow the merchant to choose its preferred payment processing network, meaning that if the card brands continue to raise fees, they’ll get less business.”

But would this actually work? While Cohen explains that it may certainly help to lower the fees, it may still hurt small businesses in the long run. 

“Senator Durbin points to the debit card industry as proof that this method works – federal law has implemented this model with debit cards for over a decade,” he says. “However, this puts the onus on merchants to educate themselves about credit card networks and which fees are cheaper. It will also hurt smaller businesses that have fewer resources to spare on understanding these nuances than big merchants with extensive finance and legal teams.”