End the 'swipe fee' squeeze on Illinois small businesses once and for all

This year, a landmark law is set to take effect in Illinois that will ban credit card companies and processors from charging interchange fees on taxes and tips. The measure is the first in the nation to take aim at out-of-control "swipe fees," providing tangible relief to small businesses and consumers. Unsurprisingly, the law is already under attack by credit card companies that want to maintain the status quo. That’s where our elected leaders in Washington can lend a hand.

Credit card interchange fees — often referred to as "swipe fees" — are the second-highest operating expense for small businesses behind labor costs. Merchants are charged these fees every time a customer swipes, inserts or taps a credit card. Because the fees — which generally amount to 2% to 4% of a purchase amount — are so high, small businesses have no other choice but to pass much of the cost on to consumers. Indeed, the average American family ends up paying an additional $1,200 every year because of "swipe fees."

It’s an inflation multiplier that throws cold water on our economy and consumer purchasing power. The problem stems from a lack of competition. Visa and Mastercard control 80% of the credit card market. This gives the corporate duopoly free rein to raise "swipe fees" with minimal pushback since few alternatives exist.

Before Illinois took action last year to begin chipping away at the credit card scheme, business owners in the state were paying a total of nearly $4 billion a year in "swipe fees." Nationwide, businesses fork over $148 billion in these credit card fees annually.

This glaring example of market manipulation should act as a wake-up call for Congress. Some — like Illinois’ own U.S. Sen. Dick Durbin — have championed reforms to give small businesses more options on how to process credit cards. The legislation, called the Credit Card Competition Act, is far from a red state or blue state issue. Even Vice President JD Vance supported the proposal while in the U.S. Senate.

The policy leverages the power of free market competition. It would require big banks with over $100 billion in assets to include a second processing network on the cards they issue to consumers beyond Visa or Mastercard. The change would encourage credit card networks to compete for the business of retailers of all types and sizes — pressuring "swipe fees" to fall. After all, as with nearly every other industry, more choice and competition bring lower prices and better service.

The legislation is a no-brainer and is expected to save businesses over $16 billion — with Illinois merchants set to save nearly $650 million. That’s real money that allows for continued investment and growth, which is why more than three-fourths of small-business owners across the country support the legislation. But until lawmakers prioritize Main Street over banks and credit card companies and get this measure across the finish line, small businesses will remain at the mercy of financial giants.

Passing the Credit Card Competition Act isn’t just about lowering fees. It’s about protecting small businesses, promoting competition in the payments sector and empowering merchants to provide economic opportunity in their communities. Thanks to the leadership of Gov. JB Pritzker, Senate President Don Harmon and House Speaker Emanuel "Chris" Welch, Illinois has taken decisive action to address this problem. Now it’s time for our elected leaders in Washington to follow their lead and do the same for the entire nation.

Rob Karr is the president and CEO of the Illinois Retail Merchants Association.

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