Merchants, Congress to Tackle Credit Card Fees

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Last updated on April 6th, 2023

Visa and Mastercard are fighting attempts from retailers to limit credit card processing fees. Over 1,600 merchants, including Target and Walmart, feel that the two payment giants have far too much control over credit card fees – and now Congress is stepping in.

Congress Bills Seek to Reign-in Credit Card Fees

Two bills in Congress are aiming for credit card fees. The bills, one introduced in July and another last week, seek to give merchants the right to route many credit-card payments over networks other than Visa and Mastercard. More than 1,600 retailers, including Walmart and Target, have voiced support for the bills. They argue that switching to other payment networks, such as American Express or Discover, could lead to significant savings.

The first bill, introduced in July by Richard Durbin (D., Ill.) and Sen. Roger Marshall (R., Kan.), seeks to give merchants the right to route many credit card payments over networks other than Visa and Mastercard. A second bipartisan bill, introduced on September 19 by Peter Welch (D., Vt.) and Lance Gooden (R., Tx.), echoes the sentiments of the first and seeks to expedite the two bills through Congress.

In a letter this week to all members of Congress, the merchants said the proposed legislation would increase competition, reducing the fees they pay when they accept credit cards. Visa and Mastercard oppose the move, stating that competition in payments already exists and that the fees are necessary for keeping card processing safe and easy.

How do Credit Card Processing Fees Work?

Credit card payment networks charge a fee every time you use a credit card to make a purchase. They cover payment processing charges, interchange fees, and other costs. These credit card processing fees cost a business between 1.5% to 3.5% of each transaction.

At the end of each business day, a merchant’s POS terminal gathers the data of all credit card sales and sends it to the bank in a batch. The bank then goes through each transaction and routes it to the appropriate processing network. The issuers will then debit each transaction amount from each cardholder’s account and transfer it to the processing networks. This will usually take place between a 24 to 48-hour period.

As the issuing bank transfers the funds of all transactions, it subtracts processing fees known as interchange fees, which it shares with the processing networks. It is the processing network that sets and regulates these fees. The remaining funds are transferred to the bank, which also takes a cut of the interchange fee. Almost every party involved in the payment processing of a credit card transaction will charge a small percentage for its services. So while it can be convenient and expedient for merchants to accept credit cards, it is not without its costs.

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About: Cory
Cory Santos

Cory is's "Jack of all trades" and resident credit expert, covering all facets of the credit card space. Cory holds academic degrees in both the U.S. and U.K. In addition to credit cards, Cory finds that jogging, cats, and memes are essential parts of a balanced day.

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