Consumers and Grocers Lose Out in the Current Anticompetitive Credit Card Market
Arlington, VA – Today, FMI – The Food Industry Association applauded the U.S. Senate Judiciary Committee and Chairman Dick Durbin (D-IL), sponsor of the Credit Card Competition Act, for holding a hearing on the Visa-Mastercard duopoly that drives up costs for grocers and their customers.
In FMI’s statement for the hearing record, it noted that the grocery industry is among the most competitive sectors in our economy. However, there is no competition on how credit card transactions are routed and how the fees for these transactions are set and levied on merchants. With Visa and Mastercard controlling over 80% of the card market in the U.S., they have the power to set both the network fee paid to them by the merchant and the interchange fee paid to the issuing bank by the merchant.
FMI Vice President, Government Relations, Christine Pollack stated, “Every time a credit card is used for a purchase, a merchant is charged on average 2-4% of the transaction price by the credit card networks and nation’s largest banks for swipe fees. With the average margin in the grocery industry of 1.6% in 2023, this means that the card networks and banks issuing cards make more of a profit off a grocery purchase than the store does, causing consumers to have to pay more of these fees.”
In 2023, merchants’ credit and debit card fees totaled $172.05 billion, an increase of 7.1% from the previous year. Of this total , $100.7 billion in fees were assessed on merchants to accept Visa and Mastercard-branded credit cards, according to the Nilson Report. These hidden fees amount to an average cost of over $1,100 per American household, according to the Merchants Payments Coalition, regardless of whether a purchase is made using cash or a credit card.
Pollack continued, “FMI and our members strongly support the enactment of the bipartisan Credit Card Competition Act to bring commonsense competition to our credit card system. Under the legislation, the nation’s largest banks that issue credit cards are simply required to enable a second, secure network on which to route transactions - fostering both competition and security, bringing down the cost of swipe fees, increasing transparency of terms, and encouraging innovative services and fraud protection.”
She concluded, “We applaud the Senate Judiciary Committee and Chairman Durbin for holding a hearing to examine this critically important issue. We urge the Senate and House to swiftly pass the Credit Card Competition Act before the end of the year to provide routing choice for food retailers and relief for grocery customers.”
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