-1920x1278.jpg)
Hyoung Chang/The Denver Post via Getty Images
A version of this article originally appeared in Quartz’s members-only Weekend Brief newsletter. Quartz members get access to exclusive newsletters and more. Sign up here.
Every time someone swipes a credit card, a small fee flows from the merchant to the bank. Most shoppers never think about it. But a growing coalition of retailers, lawmakers, and academics argues the system quietly shifts money from poorer Americans to richer ones, and Congress may finally act.
Credit card swipe fees have climbed 70% since 2019 to $198 billion in 2025, according to the Nilson Report. The rise has been driven by higher consumer spending, declining cash use, and a fundamental change in the kinds of cards Americans are carrying, which increasingly include rewards that have to be paid for somehow.
Not all credit cards cost merchants the same. A basic no-frills card might carry an interchange fee below 1.5%. A premium rewards card can run 2.1% or higher, which for some industries can totally eat up the net profit margin. And more and more consumers are turning to premium cards that have those higher fees. Cards offering points, miles, and perks accounted for just 15% of credit card volume in 2006. By 2022 they represented 60%, according to a Harvard Business School study published this year.
The rewards on those cards have gotten increasingly lavish as issuers compete for high-spending customers. The Chase Sapphire Reserve, which carries an annual fee of $795, offers airport lounge access, travel credits, and bonus points on dining and travel. American Express $AXP has its own escalating tiers with even fancier airport lounges. Banks have at times lost money on flagship cards at launch, betting they can convert rewards-seeking customers into broader banking relationships that pay off over time.
All of that competition gets funded somewhere. The answer is merchant fees, which flow into prices that every customer pays regardless of how they swipe, or whether they swipe at all.
Swipe fees cost the average household more than $1,200 a year in higher prices, according to the National Retail Federation, which has been pushing for legislation to reduce them. For credit card users who earn rewards, some of that comes back.
For cash users, none of it does, which is how Harvard researchers arrived at a $30 billion annual transfer from cash and debit users to cardholders — some of whom, a recent survey found, never bother to redeem their points at all.
Cash users tend to be the poorest Americans. Households earning under $25,000 used cash for about a quarter of their purchases, while those earning over $150,000 used it just 9% of the time, per a 2024 Federal Reserve survey. The most premium cards skew toward higher-income consumers who can afford steep annual fees and meet credit score thresholds. People struggling to pay their basic bills are helping fund airport lounge access for travelers whose annual card fee might rival their rent.
The credit card industry disputes that framing. Cash has its own costs built in, the Electronic Payments Coalition told NBC News. Businesses handling large volumes pay for armored car pickups, absorb employee theft risk, and face higher insurance costs. The coalition also argues that rewards have expanded well down the income ladder, with millions of moderate-income families using cashback cards to offset grocery and gas bills.
Gary Leff, a points and miles blogger who has covered the credit card industry for two decades, argues the Harvard paper models redistribution against a hypothetical baseline of zero interchange, a scenario under which credit card transactions would not function at all. It also assumes, he notes, that 100% of any fee reduction gets passed to consumers as lower prices, something that has not happened in Europe or Australia, where interchange is capped.
Congress has tried to pass bills for years without success. Senators Dick Durbin and Roger Marshall reintroduced the Credit Card Competition Act in January, a bill that would require large card issuers to offer merchants an alternative to Visa $V and Mastercard $MA for processing transactions, with the hope that competition would drive down interchange fees.
President Trump endorsed the measure, calling it necessary to stop the "out of control Swipe Fee ripoff," adding political momentum to a push that has stalled in previous sessions. Even with that push, the bill faces opposition from within the Republican Party, and the banking industry has worked aggressively at the state level to slow similar efforts. Illinois delayed a first-in-the-nation ban on swipe fees applied to sales taxes and tips. Colorado's governor vetoed a comparable bill last month.
Some businesses are not waiting. A growing number of restaurants and retailers have added credit card surcharges or cash discounts, making the subsidy visible at the register and forcing customers to do the math on whether their rewards are actually worth it.
