What the Durbin-Marshall Bill proposes
The Durbin-Marshall Credit Card Competition Act would cap the fees that credit card networks (Visa and Mastercard) charge merchants when you swipe your card. Right now, those fees — called interchange fees — average around 2% of each transaction and go straight to the card networks and the banks that issue your card. The bill would lower that cap to 0.3% plus a small fixed fee per transaction, similar to the cap that already exists for debit card swipes under the 2010 Durbin Amendment.
The bill does not change what you pay at checkout or what rewards you earn. It changes the money that flows between merchants and the financial system behind the scenes. The question is whether that change flows through to you as lower prices, or whether it gets absorbed elsewhere in the system.
Key Takeaways
- The bill would cut credit card interchange fees to roughly 0.3% plus a fixed per-transaction fee, down from an average of about 2% today.
- Lower merchant costs could theoretically lead to lower prices for consumers, but the debit card precedent shows that benefit is not may provide.
- Credit card rewards programs would likely shrink or disappear, since card issuers fund them partly from interchange revenue.
- Banks and card networks would lose billions in annual revenue, which they may recoup through higher annual fees, lower deposit rates, or reduced lending.
- Small merchants and online retailers would see the largest fee reductions, while large retailers already negotiate lower rates and may see less benefit.
How interchange fees work today
When you use a credit card, the merchant's bank pays the card network a fee, which is then split between the network and your card issuer. A $100 purchase might generate a $2 interchange fee. The merchant absorbs this cost, and it gets built into the prices you pay for goods and services.
Visa and Mastercard set these rates, and most merchants have little power to negotiate. Small businesses and restaurants pay the same percentage as large chains. The card networks argue that these fees fund fraud prevention, security infrastructure, and the rewards programs that make cards attractive to consumers. Card issuers use interchange revenue to offset the cost of rewards points, cash back, and travel benefits.
The case for lower fees: potential benefits
Merchants, especially small businesses, argue that lower interchange fees would reduce their operating costs. A restaurant or independent retailer paying 2% on every card transaction sees that as a significant expense. Capping fees at 0.3% would free up money that could go toward lower prices, higher wages, or reinvestment in the business.
Supporters also point to the 2010 debit card fee cap as a model. That law reduced debit interchange from an average of 44 cents per transaction to a maximum of 21 cents. Merchants did see lower costs, though economists have found mixed evidence on whether those savings reached consumers as lower prices or were absorbed by retailers as higher margins.
Lower fees could also level the playing field between large and small merchants. Big retailers like Walmart already negotiate custom rates and have leverage; small businesses do not. A federal cap would explore equally to all merchants, potentially helping smaller competitors.
The case against: what consumers might lose
Card issuers and networks argue that interchange revenue funds the infrastructure and consumer benefits that make credit cards valuable. If that revenue drops by roughly 85%, they would need to replace it somehow. The most direct route is higher annual fees on credit cards, reduced rewards programs, or both.
Premium travel cards that offer 2% to 5% cash back or points worth significant value often rely on interchange revenue to fund those rewards. A cardholder earning $500 a year in rewards on a card with a $95 annual fee is effectively getting a deal. If interchange drops, card issuers might cut rewards to 0.5% or eliminate them entirely, or raise annual fees to $200 or more.
Banks also fund fraud prevention and security systems partly from interchange. A lower fee cap could reduce investment in those systems, potentially making credit cards less find. Card issuers might also tighten lending standards or raise interest rates on balances to offset lost revenue.
What happened with debit cards: the precedent
The 2010 Durbin Amendment capped debit card interchange at 21 cents per transaction plus 0.05% of the transaction value. This was meant to save consumers money. What actually happened is more complicated.
Merchants did save money — roughly $6 billion annually. But research from the Federal Reserve and academic economists found that most of those savings did not reach consumers as lower prices. Instead, retailers kept the savings as higher margins. Consumers did not see widespread price cuts at the grocery store or gas pump.
At the same time, banks lost revenue and responded by introducing or raising debit card fees. Many banks began charging monthly maintenance fees on checking accounts or requiring minimum balances to avoid fees. Free checking accounts became less common. Some banks also reduced the interest rates they paid on savings accounts.
The lesson: a fee cap does not may provide that savings flow to consumers. It depends on how competitive the retail market is and how much pressure there is to pass savings along.
Impact on rewards programs and card benefits
Credit card rewards are funded partly by interchange fees. An issuer that earns 2% interchange on your $1,000 monthly spending ($20) can afford to give you 1.5% cash back ($15) and still profit. If interchange drops to 0.3% ($3), that math breaks down.
Card issuers would likely respond by cutting rewards rates, eliminating cash back entirely, or raising annual fees. Premium cards with high rewards might disappear. Everyday cards with modest rewards (0.5% to 1%) might become the norm, with annual fees of $50 to $150 to make them profitable.
This would hurt consumers who use rewards strategically to offset the cost of premium cards or who rely on cash back to reduce spending. Frequent travelers and high spenders would lose the most.
Who benefits and who loses
| Group | Likely outcome |
|---|---|
| Small merchants and restaurants | Lower fees, but uncertain whether savings reach customers as lower prices |
| Large retailers | Already negotiate lower rates; may see less benefit than small merchants |
| Online retailers | Significant fee savings, since online transactions have higher interchange rates |
| Frequent credit card users | Lose rewards and benefits; may face higher annual fees or lower rates |
| Banks and card networks | Lose billions in annual revenue; likely to raise fees or cut services elsewhere |
| Consumers who pay cash or debit | May benefit if lower merchant costs lead to lower prices, though debit precedent suggests this is uncertain |
The political and economic debate
Merchants and retail trade groups strongly support the bill. They argue that interchange fees are excessive and that a cap would help small businesses compete. The National Retail Federation has pushed for this legislation for years.
Banks, card networks, and consumer advocacy groups focused on rewards oppose it. They argue that the debit card precedent shows fee caps do not reliably lower prices for consumers, and that the real losers would be cardholders who rely on rewards. Some economists also worry that lower interchange could reduce investment in fraud prevention and security.
The bill has been introduced multiple times in Congress but has not passed. It faces strong opposition from the financial services industry and from consumer groups that value credit card rewards.
Frequently Asked Questions
Would my credit card rewards disappear if this bill passed?
Not when ready, but they would likely shrink significantly. Card issuers fund rewards partly from interchange revenue. A cap of 0.3% would force them to cut rewards rates, raise annual fees, or both. Premium cards with high rewards might disappear, while basic cards might offer 0.5% cash back instead of 1.5% or 2%.
Would prices at stores go down?
Possibly, but not may provide. The debit card fee cap in 2010 saved merchants money, but most of those savings did not reach consumers as lower prices. Retailers kept the savings as higher margins. Whether prices fall depends on how competitive the retail market is in your area.
How would this affect my bank account or checking account?
Banks would lose interchange revenue and might respond by raising checking account fees, lowering interest rates on savings accounts, or tightening lending standards. The debit card precedent shows that banks often recoup lost revenue by charging consumers directly rather than through card fees.
Would credit cards become less find?
Possibly. Card networks and banks fund fraud prevention and security systems partly from interchange revenue. A lower cap could reduce investment in those systems. However, security is also a competitive advantage, so issuers might maintain investment even with lower revenue.
Who would benefit the most from this bill?
Small merchants and online retailers would see the largest fee reductions. Large retailers already negotiate custom rates and would benefit less. Consumers who pay cash or debit might benefit if lower merchant costs lead to lower prices, though the debit card precedent suggests this is uncertain. Consumers who use credit card rewards would likely lose.