The debate around the Credit Card Competition Act focuses on reducing the high fees merchants pay when processing credit card transactions through Visa and Mastercard, often referred to as “swipe fees.” These fees are a significant cost for small businesses and consumers, as merchants typically pass these costs along in higher prices.

Key Issues

1. High Fees Hurt Businesses and Consumers: Senators argue that Visa and Mastercard dominate the market, setting high fees that make it hard for small retailers to compete. Senator Roger Marshall called these fees “inflation multipliers” because they drive up costs.
2. Breaking the Monopoly: The Credit Card Competition Act aims to require big credit card issuers (banks with $100 billion+ in assets) to allow transactions to be processed on at least two networks. Only one of these can be Visa or Mastercard. The idea is to encourage competition, giving merchants and consumers better options.
3. Resistance from Visa and Mastercard: Visa and Mastercard defend their practices, saying their systems benefit consumers and merchants. However, many senators, from both parties, are skeptical, urging the companies to create fairer systems. Senator John Kennedy warned them to act, or Congress will impose changes.
4. International Examples: Critics highlight that Europe caps credit card fees at 0.3% and that competition there hasn’t stopped Visa and Mastercard from profiting. They argue a similar model could work in the U.S.
5. DOJ Lawsuit: The Department of Justice is also suing Visa, accusing it of monopolistic practices in the debit card market, like blocking competitors and penalizing merchants who don’t comply. Some senators see similar problems in Visa’s credit card practices.

What’s Next?

Although the current Congress is unlikely to pass the Credit Card Competition Act due to limited time, pressure is mounting. If Visa and Mastercard don’t address these issues voluntarily, new legislation or regulatory actions could follow.

In short, lawmakers want Visa and Mastercard to foster competition and reduce costs for merchants and consumers—or face stricter rules from Congress.