At a smoke shop in Los Angeles, a Korean American customer experienced frustration at the checkout counter. When he handed over his credit card to pay, the owner remarked, “You should have mentioned you were paying by card,” before offering a cash discount. Without cash on hand, the customer ended up paying the “credit card price,” leaving him feeling at a loss.
In another instance, a resident of Koreatown who typically paid rent through a bank account recently switched to a credit card due to financial constraints. The rental platform charged an additional fee amounting to around 3% of the rent, adding nearly $100 to his monthly expenses.
Credit card fees, a significant operational cost for retailers, are increasingly straining consumer finances. According to the National Retail Federation (NRF), credit card transaction fees average just over 2% of the purchase amount, with premium reward cards charging as much as 4%. These fees collectively cost retailers over $170 billion annually, a sharp increase from $20 billion in 2001.
Retailers often pass these costs onto consumers. The NRF estimates that American households shoulder an additional $1,100 annually due to these fees, embedded into the price of almost every product. While California prohibits businesses from directly charging consumers credit card fees, many retailers offset these costs by raising prices for goods and services.
Dylan Jeon, Senior Director at the NRF, attributes rising fees to the increasing use of credit cards and the dominance of Visa and Mastercard, which together control roughly 80% of the market. “These companies face no competitive pressure, allowing them to freely raise fees or introduce new ones,” Jeon said, emphasizing the disadvantages this monopoly creates for both businesses and consumers.
However, lowering credit card fees drastically is not a guaranteed solution. Matt Schulz, a credit analyst at LendingTree, noted that when debit card fees were capped by the government, rewards programs disappeared, but product prices did not decrease as expected.
The NRF is advocating for the passage of the Credit Card Competition Act, which aims to break Visa and Mastercard’s monopoly. The proposed legislation would require major bank-issued cards to process transactions through competing networks such as NYCE or Star, fostering competition.
Doug Kantor of the Merchants Payments Coalition argues that this bill would encourage competition, rationalize fee structures, and ultimately benefit consumers and the broader economy. If implemented, a competitive system could reduce fees and provide tangible savings for consumers, offering a potential remedy to the growing financial strain caused by credit card fees.
BY HOONSIK WOO [woo.hoonsik@koreadaily.com]
