The Durbin-Marshall bill would cap the fees banks charge merchants when you swipe a credit card
The Durbin-Marshall Credit Card Competition Act is a proposed law that would limit the interchange fees — the charges merchants pay to banks and card networks every time you use a credit card. Right now, those fees average around 2% of the transaction amount and go to your bank and the card network, not to you. The bill would let the Federal Reserve set a cap on those fees, similar to how it already caps fees on debit cards under the 2010 Durbin Amendment.
The bill has been introduced in Congress multiple times since 2019 but has not become law. Understanding what it proposes, who supports it, and what it might mean for credit card rewards and banking is useful if you follow financial policy or want to know why credit card fees remain a point of debate.
Key Takeaways
- The bill would give the Federal Reserve power to set a maximum interchange fee for credit cards, capping what banks can charge merchants per transaction.
- Merchants argue lower fees would let them reduce prices; banks argue it would shrink rewards programs and increase annual fees on credit cards.
- A similar rule already exists for debit cards under the 2010 Durbin Amendment, and the credit card bill is modeled on that framework.
- The bill has not passed Congress, so current credit card fees and rewards structures remain unchanged.
- If the bill did pass, the impact on your credit card rewards, annual fees, and interest rates would depend on how banks respond to lower interchange income.
How interchange fees work today
When you swipe or tap a credit card at a store, three parties are involved: you, the merchant, and the bank that issued your card. The merchant's bank (called the acquiring bank) charges the merchant a fee to process the transaction. Part of that fee goes to your bank as interchange. The card network — Visa, Mastercard, American Express, or Discover — also takes a cut.
Interchange fees are not set by law; they are set by the card networks and banks. Visa and Mastercard publish their interchange rates, which vary by card type, merchant category, and transaction method. A rewards credit card typically has a higher interchange rate than a basic card. A grocery store might pay a different rate than a gas station. These fees are built into the price merchants pay to accept cards, and merchants often pass that cost to consumers through higher prices.
The merchant never negotiates the interchange rate directly — it is set by the network and the issuing bank. This is why merchants have pushed for regulation: they say they have no power to negotiate and must accept the rates or stop accepting cards.
What the bill proposes
The Durbin-Marshall bill would amend the Truth in Lending Act to give the Federal Reserve the authority to set a cap on credit card interchange fees, just as it does for debit cards. Under the 2010 Durbin Amendment, the Fed capped debit card interchange at roughly 21 cents per transaction plus 0.05% of the transaction amount. The credit card bill would follow a similar model.
The bill does not specify an exact cap; it would let the Federal Reserve decide what is "reasonable and proportionate" to the cost of processing the transaction. The Fed would have to consider the actual costs banks incur to process, authorize, and settle credit card payments, plus a reasonable profit margin. The bill also includes a small-merchant exemption, meaning banks with less than $10 billion in assets could charge slightly higher fees.
If passed, the bill would explore to all credit cards issued in the United States, regardless of the card network. Banks would still be able to offer rewards programs, but the structure of how they fund those rewards might change.
Who supports and opposes the bill
Merchants and retail groups support the bill. The National Retail Federation, the Merchant Payments Coalition, and individual large retailers argue that lower interchange fees would reduce their costs and allow them to lower prices for consumers. They point out that interchange fees have risen steadily over the past two decades and now represent a significant operating expense.
Banks and card networks oppose the bill. They argue that interchange fees fund fraud prevention, security infrastructure, and rewards programs that consumers value. They say that capping fees would force banks to reduce or eliminate cash-back and travel rewards, raise annual fees on premium cards, or increase interest rates to make up the lost revenue. They also argue that the current system is competitive and that merchants can choose which payment methods to accept.
Consumer groups are divided. Some support the bill because they believe lower merchant costs lead to lower prices. Others worry that banks will respond by cutting rewards programs or raising fees on consumers directly, leaving cardholders worse off.
How it compares to the debit card fee cap
The credit card bill is modeled on the Durbin Amendment, which capped debit card interchange in 2010. That law gave the Federal Reserve authority to set a cap that is "reasonable and proportionate" to the cost of processing debit transactions. The Fed set the cap at 21 cents per transaction plus 0.05% of the transaction amount, with a small-merchant exemption for banks under $10 billion in assets.
After the debit cap took effect, debit card rewards largely disappeared — most banks stopped offering cash-back on debit cards because the lower fees made rewards unprofitable. Some banks raised fees on checking accounts or reduced other benefits. However, merchants did see lower costs, and some passed savings to consumers, though the effect was not uniform across all retailers.
The credit card situation is different because credit card interchange rates are higher and credit card rewards are more popular with consumers. A cap on credit card interchange would likely have a larger impact on rewards programs than the debit cap did, which is why the debate is more contentious.
What would change if the bill passed
If the Durbin-Marshall bill became law, the when ready change would be that banks could no longer charge merchants the current interchange rates. The Federal Reserve would set a new cap, likely lower than today's rates. Merchants would pay less per transaction, and their total payment processing costs would fall.
For consumers, the effects are less certain and would depend on how banks respond. Banks might reduce rewards on credit cards, raise annual fees on premium cards, increase interest rates, or introduce new account fees. Some banks might maintain rewards to stay competitive, while others might cut them. The outcome would vary by bank and card type.
Merchants might lower prices, but there is no may provide. The debit card cap showed that merchants do not always pass savings directly to consumers. Some use lower costs to improve profit margins instead. The overall effect on consumer prices would depend on market competition and merchant behavior.
Current status of the bill
The Durbin-Marshall Credit Card Competition Act has been introduced in Congress several times, most recently in 2023. It has not advanced to a vote in either chamber. The bill faces strong opposition from banks and card networks, which have significant lobbying power, and support from merchants and some consumer advocates.
Congress has not passed new credit card regulation since the Credit Card Accountability Responsibility and Disclosure (CARD) Act of 2009, which addressed interest rates, fees, and disclosure practices but did not touch interchange. The Durbin-Marshall bill remains a proposal rather than law, and credit card interchange fees continue to be set by banks and card networks without a federal cap.
If you want to track the bill's progress, you can search for it by name on Congress.gov, which shows the current status, sponsors, and any recent activity.
Frequently Asked Questions
Would a credit card interchange cap lower my rewards?
Possibly. Banks fund rewards programs partly through interchange fees. If those fees were capped, banks might reduce cash-back percentages, travel points, or sign-up bonuses to maintain profitability. However, some banks might keep rewards competitive to attract customers. The debit card cap showed that rewards often disappear when interchange falls, but credit card competition is stronger, so the outcome is uncertain.
Would merchants lower prices if interchange fees were capped?
Not necessarily. When the debit card interchange cap took effect in 2010, merchants did not uniformly lower prices. Some reduced costs to consumers, but others used the savings to increase profit margins. Price changes depend on market competition in each industry and merchant behavior, not just on lower costs.
Does the bill explore to all credit cards?
Yes, the bill would explore to all credit cards issued in the United States, including Visa, Mastercard, American Express, and Discover. However, banks with less than $10 billion in assets would be allowed to charge slightly higher fees under a small-merchant exemption.
Why do credit card interchange fees exist?
Interchange fees compensate banks for the cost of processing transactions, managing fraud and chargebacks, and funding security infrastructure. Banks also use interchange revenue to fund rewards programs. The debate is over whether current fees are higher than necessary to cover these costs and provide a reasonable profit.
Has any other country capped credit card interchange?
Yes. The European Union capped credit card interchange at 0.3% of the transaction amount in 2015. Debit card interchange was capped at 0.2%. These caps are lower than current U.S. rates, and European banks have reduced rewards programs in response, though the impact on consumer prices has been mixed.