President Biden promised that the exorbitant prices resulting from the pandemic weren’t here to stay, saying, “Most of the price increases we have seen are expected to be temporary.” One year later, the president and his administration have somehow managed to drive the inflation rate up to a number this country hasn’t seen in 40 years.
Meanwhile, millions of Americans are busy tightening their budget bootstraps to make ends meet. But with trips to the grocery store costing 11.9 percent more than they did in May 2021, it’s becoming almost impossible for families to stay afloat.
While consumers feel the squeeze with every swipe, many in the financial sector are making excess profits off inflated prices. Swipe fees — an additional charge incurred with each credit card transaction — are lining the pockets of big banks as they continue to take a cut every time you ring up at the register.
The typical household spends about $900 a year on swipe fees, but even amid an economy on the brink of recession, Visa and Mastercard decided it best to further pile onto the pain. As the consumer price index accelerated 8.3 percent in April, the two credit card giants instituted another swipe fee hike.
While increasing swipe fees by a few small percentage points might not sound devastating, it contributes to a vicious cycle of product price spikes enacted to cover the increased fee — a game most of our wallets can’t afford to play right now. But unfortunately, given that Visa and Mastercard make up 80 percent of the credit marketplace, Americans have historically had no option but to begrudgingly be carried along for the ride.
Thankfully, Congress has stepped in to address this clear market failure. Sen. Roger Marshall, R-Kan., recently introduced the Credit Card Competition Act, a bipartisan bill that would decouple the market duopoly by requiring card issuers like banks, credit unions and other lending institutions to provide at least one other routing option for credit card companies to use when processing transactions.
Giving credit companies routing choice is the first step in fostering a competitive environment that ultimately stands to benefit consumers. In fact, creating multiple routing options could save businesses and their customers upward of $11 billion annually. But creating competition isn’t just a boon for savings; it also encourages more technologically advanced and sound means of processing transactions.
Just look at what happened when competition was introduced in the debit space. End-to-end encryption became the standard of networks vying to entice customers with the latest security measures. The Credit Card Competition Act specifically ensures foreign entities stay out of the American market, protecting users from networks funded by foreign governments.
Moreover, more routing options mean more reliability. Credit card users will appreciate the comfort and convenience of knowing that even if the network experiences an outage or hacking, the credit companies have other routing networks they can seamlessly lean on as backup.
It’s time to pass real solutions that will decrease prices, like the Credit Card Competition Act. Americans simply can’t afford to wait any longer.
