Credit cards

Iowans need credit card competition to keep prices low

  • Wes Enos is a member of the Bondurant City Council and former chairman of the Polk County Republican Party.

As the inflation rate once again defies expectations, hitting a 41-year high with a 9.1% year-on-year increase in June, retailers and other businesses are doing what they can to limit the impact of rising prices on consumers. However, many Americans are unaware that using a credit card to purchase goods and services also drives up prices.

Credit card swipe fees, which are based on a percentage of the total transaction, are charged to merchants each time a credit card is used. This means that as prices rise, banks that apply these fees set by Visa and Mastercard continue to increase their profit margins while merchants must weigh the extent to which they pass these additional costs on to their customers.

For many businesses already struggling to stay afloat amid sky-high inflation and supply shortages, sweeping fees are often the second-highest expense after labor and, on average, , vary between 1.5% and 3.5% of the transaction. However, that hasn’t deterred Visa and Mastercard – which dominate the credit card industry with nearly 80% market share – from raising fees further this year, despite the fact that the cost of processing transactions decreases as technology advances. Even U.S. lawmakers, who sent a bipartisan letter to their leaders urging them not to continue, could not convince them not to raise the fee.

Unfortunately, Visa and Mastercard simply don’t face the same competition as other companies. Without legislative action, this duopoly will continue to wield its power over the industry to weed out competitors and raise sweeping fees indiscriminately.

This is why it is imperative that the senses. Chuck Grassley and Joni Ernst support recent bipartisan legislation to help bring competition to the payments market. The credit card competition law, proposed by the senses. Roger Marshall, a Republican from Kansas, and Dick Durbin, a Democrat from Illinois, would demand that a second routing option be provided when processing a transaction to break the stranglehold that Visa and Mastercard have on merchants.

This strategy isn’t new either, having worked to save merchants billions of dollars when these rules were enacted for debit cards. Research that followed this decision estimates that almost 70% of these savings were passed on to consumers.

In addition, the Credit Card Competition Act strengthens the security of our payment system by excluding China. As it stands, China UnionPay is on the steering committee of EMVCo and PCI along with Visa and Mastercard. These two organizations set security standards for the entire credit card industry, creating a clear conflict of interest as China is at the forefront of discussions and decisions in which merchants and consumers do not participate. . The bipartisan bill would address this by allowing the Federal Reserve Authority to block any network from joining the US market if it poses a security threat and specifically blocking China UnionPay once enacted.

With increasing foreign security threats and inflationary pressures hitting merchants hard, the need to pass the Credit Card Competition Act has never been greater. It’s time to make sure that Visa and Mastercard compete for customers and not the other way around. I hope Grassley and Ernst will join their colleagues on both sides of the aisle and support this legislation to bring relief to American businesses and consumers.

Wes Enos is a member of the Bondurant City Council and former chairman of the Polk County Republican Party.