How Swipe Fees Work and Why Retailers Are Paying More

Retailers are constantly evolving to meet customer expectations. From contactless payments and online checkout to traditional card swipes at the counter, credit cards have become the default way consumers pay.

What many shoppers — and even some business owners — don’t realize is that every card transaction comes with a hidden cost: interchange fees, commonly referred to as swipe fees. And those fees are quietly costing retailers and consumers hundreds of billions of dollars each year.

What Are Interchange (Swipe) Fees?

Every time a customer pays with a credit card, the retailer pays a processing fee to complete the transaction. On average, swipe fees run about 2.24% of the sale, but for premium travel and rewards cards, they can reach 4% or more.

These fees are set by the card networks — primarily Visa and Mastercard — and then distributed to the banks that issue the cards. Retailers don’t get to negotiate these rates, and customers rarely see them itemized.

How High Are Swipe Fees Today?

Swipe fees in the United States are the highest in the industrialized world, totaling more than $160 billion annually. Credit card processing fees alone now exceed $126 billion per year, with Visa and Mastercard accounting for over $93 billion of that total.

Since 2009, swipe fees charged by the major networks have nearly quadrupled, and fee increases continue to roll out — including higher fees on groceries and fuel. This growth has far outpaced retail sales growth, meaning fees are consuming a larger share of every transaction.

Why Swipe Fees Keep Rising

Visa and Mastercard control roughly 80% of the U.S. credit card market, giving them enormous influence over pricing. With limited competition in routing credit card transactions, retailers have little leverage to push back on rate increases.

Even as technology improves and transaction risks decline, fees continue to climb — largely because the current system allows the dominant networks to raise rates without meaningful negotiation.

How Swipe Fees Impact Retailers

For many retailers, swipe fees are now the second-highest operating cost after labor.

That has real consequences:

• Less capital to hire staff or raise wages

• Fewer resources to invest in technology or expansion

• Increased pressure to raise prices for customers

Refusing to accept credit cards isn’t realistic in today’s market, which means retailers are effectively forced to absorb or pass along these costs.

Is There a Legislative Solution?

In Congress, lawmakers have reintroduced the Credit Card Competition Act, which aims to increase competition by requiring large financial institutions to enable multiple card networks for routing transactions.

Supporters argue that competition could lower fees, improve security, and save businesses and consumers an estimated $15 billion per year. Critics warn of potential impacts on rewards programs and existing infrastructure. As with most legislation, the outcome remains uncertain — and timelines are long.

What Retailers Can Do Right Now

Regardless of what happens in Washington, swipe fees are a today problem, not a future one.

At SignaPay Direct, we help retailers take control of payment costs now through transparent, compliant solutions designed for modern businesses:

• Dual Pricing – Clearly posted cash and card prices that allow card costs to be built into card transactions upfront

• Compliant Surcharging – Where permitted, properly disclosed surcharges that offset processing expenses

• Flexible Payment Technology – Online checkout, virtual terminals, recurring billing, and in-store solutions that apply pricing consistently

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These strategies don’t eliminate swipe fees — but they give retailers control, clarity, and predictability, without surprising customers.

What About Security and Rewards?

Independent and competing payment networks have securely processed debit and ATM transactions for decades. Increased competition historically drives better security and innovation, not less.

As for rewards programs, global examples show that banks continue to offer incentives even in markets where interchange fees are far lower than in the U.S. Rewards are a business decision — not a requirement tied solely to high swipe fees.

The Bottom Line

Swipe fees have become one of the most significant — and least understood — costs in retail. While lawmakers debate reforms, retailers don’t have to wait to protect their margins.

SignaPay Direct empowers retailers with transparent payment strategies that work within today’s system, helping businesses stay competitive while delivering the seamless payment experience customers expect.

If you are ready to scale AND grow your retail business. We make that happen. contact us today.