Merchants Support Maryland Legislation to Block Swipe Fees on Sales Tax
WASHINGTON, D.C. — State legislation that would block credit card networks and banks from charging Maryland merchants swipe fees on the sales tax portion of transactions gained support from the Merchants Payments Coalition (MPC).
"The credit card industry price-fixing swipe fees is bad enough, but taking a slice out of tax dollars before retailers can hand them over them to the state of Maryland is unconscionable," MPC Executive Committee member and NACS General Counsel Doug Kantor said. "Retailers have to make up the difference, and that ultimately drives up prices for consumers. It is time for this abuse to end. Marylanders' tax dollars should not be siphoned off to Wall Street this way and we appreciate legislators looking to solve this unjust problem."
Kantor's remarks came during testimony before the House Economic Matters Committee on Jan. 21, which held a hearing on swipe fee legislation sponsored by committee Vice Chairman Brian Crosby (D-St. Mary's County) and Delegate Todd Morgan (R-Calvert and St. Mary's Counties).
Under the bill, banks and card networks would be barred from charging credit card or debit card swipe fees on sales tax beginning Oct. 1. The measure is similar to an Illinois law passed last year that is being challenged in court by banks, although a federal judge ruled last month that Visa and Mastercard must comply.
Swipe fees are charged to merchants to process transactions and average between 2% and 4% of each credit card purchase, costing merchants between $2 and $4 out of every $100 spent on credit cards. Credit and debit card swipe fees have soared more than 50% since the COVID-19 pandemic and reached a record $172 billion nationwide in 2023. They are most merchants' highest operating cost after labor and too much to absorb, driving up consumer prices by more than $1,1,00 a year for the average family, MPC said.
Credit card swipe fees cost merchants and their customers nearly $2 billion in 2023, according to payments consulting firm CMSPI. That included $156.9 million in swipe fees on sales tax.
The Maryland legislation comes as Congress is considering the Credit Card Competition Act to address swipe fees more broadly at the national level. Under the bill, banks with at least $100 billion in assets would be required to enable credit cards to be processed over at least one unaffiliated network like Star, NYCE or Shazam in addition to Visa or Mastercard. The measure is expected to result in competition over fees, security and service that would save merchants and their customers more than $16 billion a year, including $307 million in Maryland.
Visa and Mastercard currently control more than 80% of the credit card market and each centrally sets the swipe fees all banks issuing their cards charge. Each also restricts processing of transactions to its own network.
Headquartered in Washington, D.C., Merchants Payments Coalition represents retailers, supermarkets, convenience stores, gasoline stations, online merchants and others fighting for a more competitive and transparent card system that is fair to consumers and merchants.
