Why Rand Paul and Mitch McConnell must support Senate Credit Card Bill

Kentuckians need relief from record inflation, and while Democrats are banking on their liberal wish list spending package to bring down prices, several studies show the “Inflation Reduction Act” may have the opposite effect. Meanwhile, a bipartisan group of legislators has advanced a new bill that would help alleviate the financial strain felt by families across the U.S. while leveling the playing field for some of the companies that have profited the most from this crisis. 

The legislation, called the Credit Card Competition Act, is designed to reinsert competition back into the payments marketplace that has long been dominated by the same two companies: Visa and Mastercard. Introduced by Sens. Roger Marshall (R-KS) and Dick Durbin (D-IL), this bill would give merchants a choice between at least two networks for processing a transaction while protecting small and medium-sized banks.

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Between Visa and Mastercard, the two companies have 80% market share which they leverage to charge and raise credit card swipe fees on merchants, and subsequently consumers. These fees are charged to businesses whenever a customer chooses to pay with a credit card and range anywhere from 1.5-3.5% on every purchase. 

I am one of the few left that is soaking up those fees from my profits instead of up charging my clients to cover the cost. Each year it gets more and more difficult to do and still keep my numbers close to making a decent living. My credit and debit card swipes have doubled every single year.

Swipe fees serve the dual purpose of padding the profit margins of major banks that enforce these fees set by credit card companies. While small businesses across Kentucky and the country struggle to stay afloat, Visa and Mastercard continue to soar with inflation by raking profit margins above 40% and hauling record earnings. In fact, during an investor call, Visa’s chief financial officer referred to inflation as a “net positive” for the company.

Fortunately, lawmakers have a solution to return the leverage back to where it belongs in a free market: with consumers. Instead of instituting a cap on fees, the CCC Act requires financial institutions to offer a second routing option when processing transactions. This would eliminate the exclusivity contracts that major banks sign with Visa and Mastercard in exchange for a kickback in fees that they use to offer rewards. 

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By forcing these credit card giants to compete again, merchants would finally have the option to accept services from competing networks with lower fees. This will improve the quality and security of transactions and will decrease costs for businesses/consumers. 

Importantly, the CCC Act takes measures to protect small and medium-sized banks by only issuing these rules for banks with over $100B in assets. In the U.S., that’s a total of 33 financial institutions, meaning our community banks here in Kentucky will not be impacted. The legislation also works to tighten credit card security. Today, any bank in the United States is free to select China Union Pay as their network, but the Credit Card Competition Act would allow the Federal Reserve to block any network from entering the U.S. market if it threatens security – and would ensure that it would block China Union Pay.

With that in mind, the CCC Act is a no-brainer to protect merchants and consumers who have had no say in the services and fees they’ve been forced to accept. That’s why Kentuckians are counting on Sens. Rand Paul (R-KY) and Mitch McConnell (R-KY) to join this bipartisan effort to help lower prices for Americans.

Jennifer Srygler is Owner Timeless Trends Beauty Salon in Horse Cave.