Will Cutting Credit Card Swipe Fees Lower Prices? Who Really Gets the Savings

Research reviewed October 20, 2026. Legislative status and economic estimates may change.

The short answer: The Credit Card Competition Act could lower the cost of accepting credit cards, but there is no guarantee that retailers would lower prices by the same amount, or at all. Some savings could reach shoppers through price competition; some could remain with payment processors and merchants. Banks could also respond by changing card rewards or fees. The actual net benefit to consumers is unknown.

A widely repeated claim that reform would save the average family $1,200 a year is not supported by the most commonly cited estimate of the proposed law’s effect. The payments consultancy CMSPI estimated that credit-card routing competition could have generated more than $17 billion in annual savings using 2024 activity. Even if a full $17 billion reached shoppers and was divided equally among the nation’s 2025 households, that would amount to about $126 per household per year, not $1,200.

That arithmetic does not mean reform would be pointless. A multibillion-dollar reduction in payment costs could matter substantially for businesses and consumers. It does mean that three different questions must not be confused: How much do merchants pay now? How much could competition eliminate? And how much of the reduction would reach the public?

The $1,200 promise and the $17 billion estimate are not the same thing

In official remarks on September 9, 2026, President Donald Trump said that cutting credit card swipe fees would save the average family at least $1,200 per year. In October, a White House spokesperson quoted in reporting summarized by the National Association of Convenience Stores instead described $1,200 as the annual amount that hidden swipe fees cost households.

Those statements make different claims. The existing economic burden of a fee is not necessarily the amount that legislation would eliminate, and an eliminated business expense is not necessarily a dollar-for-dollar consumer saving.

The major figures behind the debate need to be kept separate:

The 2025 fee figures come from the Merchants Payments Coalition’s March 18, 2026 release citing the Nilson Report. The coalition represents merchants seeking fee reform; its fee totals are attributed to a specialized payments-industry publication, while its conclusions about household costs are advocacy claims that need separate verification.

The $17 billion figure comes from CMSPI’s own published estimate. CMSPI says routing competition could have produced over $17 billion in 2024, an increase from its $16.4 billion estimate for 2023. Its public explanation cites payment-network reports, Federal Reserve interchange data, and assumptions about which transactions would be covered. It does not constitute a measured consumer price reduction. CMSPI is a payments consultancy that helps businesses manage payment costs, so its commercial perspective also matters when evaluating the forecast.

The apparent size of the figures is not proof of how much any particular family would receive. One measures a broad existing cost; another estimates a potential reduction in a subset of payment costs; the third predicts a household outcome.

What would $17 billion actually mean per household?

To make the scale visible, sherafy.com divided the illustrative $17 billion national savings pool by the Census Bureau’s 2025 count of 134.79 million U.S. households, then varied the proportion hypothetically reaching consumers.

These are scenarios, not forecasts. The $17 billion starting point is itself a forecast based on 2024 activity; the household denominator is from 2025. Using adjacent years is appropriate for a transparent scale comparison, but not for claiming a measured 2026 benefit. Actual savings would not be distributed equally. Spending patterns, merchant types, payment methods, and market competition would all matter.

The word family also has a specific statistical meaning. The Census Bureau counted 85.963 million family households in 2025. If the entire $17 billion went exclusively and equally to those households, the result would be approximately $198 per family household per year. That artificial scenario excludes all nonfamily households and still falls far short of $1,200.

Conversely, delivering $1,200 to every one of those family households would require about $103 billion annually. That is more than six times the entire $17 billion modeled savings pool, before considering nonfamily households or changes to rewards and banking fees.

This does not establish an absolute ceiling on what an individual family could save. Households with unusually high exposure to prices affected by payment costs could experience different outcomes. But the published national projection does not provide a mathematical basis for a $1,200 average family saving.

Our calculation, step by step

The per-household illustration uses:

Estimated annual consumer benefit = $17,000,000,000 × assumed consumer pass-through rate

Average annual benefit per U.S. household = estimated annual consumer benefit ÷ 134,790,000

For example, with a hypothetical 50% consumer pass-through rate:

($17,000,000,000 × 0.50) ÷ 134,790,000 = $63.06 per household annually

The consumer pass-through rate is deliberately an adjustable assumption, not a historical fact or an estimate attributed to CMSPI. The calculation only translates a national projection into understandable scale.

Who actually receives the fee on a $100 credit card purchase?

A common explanation says the merchant pays roughly $2 or $3 on a $100 card purchase and Visa or Mastercard collects the money. That compresses several different payments into one.

The Federal Reserve Bank of Richmond’s explanation of card acceptance costs describes typical merchant fees of roughly 1.5% to 3.5%, depending on the transaction. The total is usually divided among several participants:

1. Issuing bank. The bank that issued the customer’s credit card generally receives the interchange fee, which is usually the largest component. Interchange revenue helps support the bank’s overall card business, including rewards, credit services, and fraud-related costs.
2. Payment network. A network such as Visa or Mastercard establishes network rules and, in its familiar four-party model, publishes interchange schedules that shape what issuers receive. The network also charges its own assessments and other fees.
3. Acquiring bank and payment processor. The merchant’s payment-service provider handles acceptance, authorization, settlement, technical services, and sometimes bundled software. It collects its own margin and may charge merchants a blended rate instead of passing through each wholesale cost item separately.

These distinctions matter because lower network or interchange costs do not guarantee that the merchant’s bill falls by an identical amount. Merchant contracts and processors’ pricing practices can determine how much reaches the business.

They also correct a common misconception: the total $198.25 billion reported as swipe fees is not $198.25 billion in revenue earned by Visa and Mastercard themselves. Issuing banks and other payment intermediaries receive substantial portions of payment fees.

There are two separate points where savings can stop

The strongest test of any swipe-fee reform is to trace money through both stages of pass-through.

First: Do cheaper payment networks mean lower bills for merchants?

Suppose increased routing competition reduces the underlying cost of handling a transaction. A merchant on a transparent interchange-plus processing contract might see much of that change reflected in its bill. A merchant paying one blended percentage, however, may not automatically receive the same reduction.

This is not theoretical. In its March 2026 payments review, the Reserve Bank of Australia summarized international evidence on interchange reductions:

These are not interchangeable evaluations of the American bill. They involve different countries, regulations, contracts, and market structures. But their variation establishes a critical point: even a verified reduction in underlying payment fees may reach merchants unevenly.

The Australian central bank concluded that transparency matters enough to require large acquirers to disclose merchant fees and publish pass-through measures after domestic interchange changes. If such measures are needed to observe the first stage of savings, it would be premature to assume the entire reduction reaches retailers automatically.

Second: Will merchants lower prices once their costs fall?

A business with lower costs has options. It can lower prices, hold prices steady, raise wages, invest in service, reduce debt, or retain more profit. Which response occurs depends partly on how much competitive pressure it faces.

A supermarket competing against nearby supermarkets may have more reason to translate persistent cost reductions into lower prices than a business with few local rivals. Yet even in a competitive market, a consumer benefit may appear as a smaller future price increase rather than an obvious price cut at the register. This makes the effect harder to observe without a credible estimate of what prices would otherwise have been.

A merchant that maintains the same sticker price has not necessarily proved that consumers received no benefit. Equally, a merchant’s claim that savings are embedded in prices does not establish that shoppers received them. The relevant comparison is actual consumer prices against a defensible counterfactual.

This also explains why cash customers enter the debate. Where merchants charge a uniform price regardless of payment method, the costs of accepting more expensive rewards cards can be spread across the price paid by cash, debit, and ordinary credit-card users. That does not mean a cash payment itself incurs a credit-card interchange fee. It means merchant costs can influence a common retail price.

What happened when Congress regulated debit-card fees in 2011?

The closest U.S. historical comparison is the Durbin Amendment to the 2010 Dodd-Frank Act, implemented through Federal Reserve Regulation II beginning in October 2011.

For covered debit-card issuers, the Federal Reserve’s 2011 rule generally limited interchange charges to 21 cents plus 0.05% of the transaction value, with a possible one-cent fraud-prevention adjustment. It also restricted debit network exclusivity and merchant routing restrictions. The interchange cap applied to issuers with at least $10 billion in assets, with certain other statutory exemptions.

That earlier reform contained both a price cap and routing provisions. The 2026 credit-card proposal instead focuses on network competition and does not prescribe a comparable nationwide credit interchange cap. Outcomes from 2011 therefore cannot be mechanically projected onto the new bill.

The Federal Reserve’s merchant survey was discouraging, but not a complete price experiment

In a 2014 Federal Reserve Bank of Richmond study, Zhu Wang, Scarlett Schwartz, and Neil Mitchell analyzed merchant survey responses collected roughly two years after the debit-fee rule took effect. The researchers reported that among surveyed merchants:

• 77.2% made no price change in response to the regulation.
• 21.6% raised prices.
• 1.2% lowered prices.

The broader study also found that the effect on merchants’ debit acceptance costs was unequal. Some small-ticket merchants experienced higher costs despite the law’s general purpose of reducing fees.

Those findings undermine any claim that lower debit interchange fees automatically generated widespread visible price cuts. But this was a merchant survey, not a controlled nationwide estimate of how the retail price level differed from what it would have been without regulation. A business reporting no change in shelf prices might still have avoided a planned increase, and a business raising prices might have faced unrelated cost pressures.

The correct conclusion is that the survey found very little direct merchant-reported price cutting, not that a complete causal experiment proved the consumer benefit was exactly zero.

A widely repeated 69% consumer-savings figure was an assumption in a model

Here is where the source history becomes especially important.

In a 2013 study titled The Costs and Benefits of Half a Loaf, economist Robert J. Shapiro estimated that the debit reform generated roughly $8.5 billion in merchant cost savings in 2012 and that consumers received about $5.87 billion through lower prices.

That works out to approximately 69% of the estimated savings.

But Shapiro did not directly observe that 69% of Durbin-related fee reductions reached shoppers. To estimate retail pass-through, he borrowed an average 0.69 rate from a separate study of 23,147 manufacturer promotional cost changes affecting grocery and drugstore merchants. He then applied that rate to his estimated debit-fee savings.

The original 2013 report acknowledges financial support from the Merchants Payments Coalition, a group advocating on behalf of retailers. Funding alone does not make an economic calculation wrong, but it should be disclosed, particularly when an assumed result is later repeated as though it were an observed fact.

The distinction is simple:

What the model established: If merchants passed through 69% of Shapiro’s estimated debit-fee savings, consumers would have received approximately $5.87 billion in 2012.

What it did not establish: That an independent measurement showed 69% of debit-fee reductions actually reached consumers.

Nevertheless, the Merchants Payments Coalition’s current advocacy materials continue to describe the earlier result as 70% of savings having been passed to consumers. That is stronger language than the 2013 methodology warrants.

In 2025, the same economist reached a sharply different conclusion

In December 2025, Shapiro and Jerome Davis published The Unanticipated Costs and Consequences of Federal Reserve Regulation of Debit Card Interchange Fees through the Progressive Policy Institute.

The later assessment concluded that the expected consumer price benefits of the debit-fee cap had failed to materialize and emphasized higher checking-account costs and shifts toward more expensive credit-card payments. That is a substantial departure from Shapiro’s earlier estimate of billions of dollars in price benefits.

The newer report deserves attention, not automatic deference. For example, part of its calculation of the effect of debit regulation on later credit-card use depends on a modeled alternative history: what debit and credit payment volumes might have looked like if their earlier growth patterns had continued. Many other changes, including e-commerce growth, card technology, credit availability, and consumer preferences, could also have affected the mix of payments over that decade.

The two reports therefore support a defensible conclusion rather than a simple reversal of certainty: the optimistic 2013 consumer-savings figure should not be presented as observed proof, and the 2025 retrospective should not be treated as an experiment that isolates every consequence of the Durbin Amendment.

Banks did change checking-account terms after debit reform

A separate line of research is stronger on the specific response of banks. In a 2017 Federal Reserve Board study, Mark Manuszak and Krzysztof Wozniak compared banks exposed to the debit fee cap with other banks while accounting for competitive spillovers. They found that covered banks responded by reducing free checking availability, raising monthly account charges, and increasing minimum balance requirements.

An earlier Federal Reserve Board analysis of bank profitability found that covered banks only partially offset their lost interchange revenue with deposit fees. It would be inaccurate to claim that all banks simply recovered every lost dollar from customers.

This matters for a credit-card reform because payment fees and consumer account terms are economically connected. Still, a historical change in debit-linked checking fees does not prove that a new credit-network routing law would cause the same change, in the same amount, for credit-card customers.

Would lower swipe fees destroy credit card rewards?

Not necessarily. But changes to rewards are a real possibility.

Credit-card issuers receive interchange revenue, and card rewards are one way they compete for customer spending. Lower interchange income can change the economics of a rewards program. Banks could respond by reducing earning rates, raising annual fees, changing eligibility, or accepting lower margins. Competitive pressure for cardholders might also lead them to preserve popular benefits.

The Federal Reserve Bank of New York’s Credit Card Banking study, revised August 2026, examined large-scale account-level data and found that rewards and noninterest costs are more than offset by interchange and other noninterest income at the industry level. That finding helps explain why card issuers value interchange revenue. It does not establish exactly how much of a hypothetical network fee reduction banks would pass through to rewards users.

The two most categorical political claims are therefore both too strong:

• “Rewards will disappear.” The bill does not require eliminating rewards, and issuers have multiple possible ways to respond to lower revenue.
• “Rewards cannot be affected because the bill is about routing.” Routing competition is intended to change the economics of transaction fees. Revenue changes can affect the incentives that support rewards, even if the bill does not mention rewards explicitly.

The relevant question is whether potential price relief exceeds any loss in rewards or increase in other charges for a specific consumer.

A simple net-benefit example

Imagine a household spends $30,000 a year on purchases whose prices are affected by card-acceptance costs. It also charges $20,000 of those purchases to a cash-back credit card.

Assume, purely for illustration, that reform eventually results in prices 0.20% lower than they otherwise would have been. That would save $60 on $30,000 of eligible purchases. Now suppose the credit-card cash-back rate falls from 2.00% to 1.75%. On $20,000 of card spending, that is a $50 annual reduction in rewards.

Illustrative net benefit: $60 in price savings − $50 in lost rewards = $10 a year.

If the household’s actual price benefit were only $20, the same rewards change would leave it $30 worse off. If the rewards rate remained unchanged, it would keep the entire price benefit.

These are not forecasts of what the legislation will do. They demonstrate why price effects and cardholder effects must be counted together. They also exclude any change in account fees, surcharges, shopping behavior, or card benefits that are difficult to value in cash.

Would cash and debit users benefit more than rewards-card users?

They could, especially where merchants use common prices for all payment methods. Cash and debit customers typically receive less in credit-card rewards, yet can share in retail prices influenced by the cost of accepting premium credit cards.

A Federal Reserve Bank of Boston working paper, later published in the Journal of Banking & Finance, examined payment costs, merchant price pass-through, bank charges, and rewards across income groups in the United States and Canada. It found that the net cost of payment methods tends to be regressive: higher-income consumers generally benefit more from rewards and pay a lower net cost relative to their transaction spending than lower-income consumers.

The study’s results also depend on assumptions about what costs merchants pass through. It does not demonstrate that any specific share of savings from the 2026 proposed law will reach a particular income group.

There is another important distinction: credit-card users who carry balances can incur interest expenses that dwarf cash-back rewards. The swipe-fee legislation does not cap credit-card interest rates. It should not be confused with separate proposals about credit-card APRs or other lending charges.

What exactly would the Credit Card Competition Act change?

The 2026 Senate bill, S. 3623, introduced by Senator Roger Marshall with Senators Dick Durbin and Peter Welch as original cosponsors, would require the Federal Reserve to write regulations preventing covered issuers and card networks from maintaining certain exclusive routing arrangements.

Under the proposed rules:

• A covered credit-card issuer, together with its affiliates, would have more than $100 billion in assets.
• Covered cards would need access to at least two qualifying, unaffiliated payment networks, rather than leaving the merchant with a single effective processing route. The two largest general-purpose card networks could not simply be the only pair offered.
• Merchants would gain the ability to direct eligible transactions over available qualifying networks without prohibited contractual or technological restrictions.
• The legislation expressly includes transactions where the card is not physically presented, such as online purchases.
• Cards issued within the bill’s defined three-party payment-system model would be excluded from these routing provisions. The bill also requires the Federal Reserve to identify networks posing specified national-security risks or operated or sponsored by foreign states.

The legislation does not impose a specific credit-card interchange cap, require merchant price cuts, or establish a consumer rebate. It also does not require banks to retain existing reward rates.

The Federal Reserve would have to issue implementing regulations within a year after enactment, if Congress passes it. An introduced bill is not an operative consumer protection.

Status as of October 20, 2026: The Senate measure, S. 3623, and its House companion, H.R. 7035, are listed in their official legislative records as introduced and referred to committee. They have not become law.

Why routing competition is different from a government price cap

A statutory cap directly limits a specified fee. Routing competition instead creates an opportunity for competing networks to offer lower costs or better services. Whether it succeeds depends on which networks can actually process the transactions, what issuers and processors charge, and whether merchants can exercise meaningful routing choice.

Competition can exert pressure without a government-set maximum price. But additional network options alone do not mathematically guarantee a particular reduction in interchange, network assessments, or merchant service charges.

That uncertainty is precisely why the $17 billion figure must be labeled modeled potential savings, not a scheduled transfer from banks to households.

So who would actually win if the bill passed?

The evidence supports several conditional outcomes, not one guaranteed winner:

Retail competition matters, but so do the details of the payment system. The merchant who receives a lower fee is not necessarily the shopper who receives a lower price. The cardholder who loses a fraction of a reward point is not necessarily worse off once retail price changes are counted. And a bank that loses fee income is not necessarily compelled to recover every dollar from consumers.

The question is not whether reform benefits merchants or consumers. Both could benefit. The unanswered issue is how the total benefit would be divided, and how bank and processor responses would change the net result.

What can consumers reasonably conclude today?

Verified: American merchants pay substantial card-acceptance fees. The 2026 Credit Card Competition Act would change routing rules for certain large-bank credit cards. It is not currently law. The frequently quoted $198.25 billion is a credit-and-debit fee total, while the more than $17 billion figure is a modeled potential saving based on 2024 transactions.

Supported but uncertain: Greater routing competition could reduce costs for some merchants. Price competition could pass part of those benefits to shoppers, while credit-card issuers could adjust rewards or other terms. The size and distribution of those effects cannot presently be stated with confidence.

Not established: That the proposed law will save the average family $1,200 a year, that all merchants will retain the savings, or that credit-card rewards must disappear.

The consumer case for payment-network competition does not require pretending that every merchant will lower prices. The case against it does not require pretending that rewards are the only thing consumers pay for. Both questions belong in the same accounting.

Until evidence measures what happens at each step, a promised national saving should be treated as an estimate, not a household refund.

Research Methodology and Calculation Notes

This article compares the text of the 2026 proposed legislation with current public claims and original economic research. Its calculation uses CMSPI’s publicly stated more than $17 billion modeled savings opportunity for 2024 and 2025 U.S. Census household counts as a denominator solely to illustrate scale. For ease of reproduction, the calculation uses $17 billion, not an unspecified amount greater than $17 billion. Therefore it is not presented as a mathematical upper bound on all conceivable network savings.

The household calculations assume different hypothetical fractions of that national amount reach consumers and assume equal distribution solely for comparison. They do not estimate processor pass-through, merchant behavior, consumer spending, or reward changes from original transaction-level data. Importantly, CMSPI’s public summary does not supply enough detail to independently reproduce its full counterfactual or to determine whether applying an additional processor-level adjustment to that estimate would double-count an assumption already built into the model.

Historical debit-fee studies are treated as evidence about the earlier debit regime, not as forecasts for a different credit-routing proposal. Merchant surveys, modeled counterfactuals, and bank-account pricing studies measure different outcomes and are identified accordingly. Trade associations and consultants are disclosed when their claims are material, and source-level conclusions are distinguished from sherafy.com‘s calculations and interpretation.

References and Further Reading

Legislation and Official Statements

• Credit Card Competition Act of 2026, S. 3623, introduced text: U.S. Government Publishing Office. The operative wording on bank size, qualifying networks, routing restrictions, online payments, and exceptions.
• S. 3623 legislative status and H.R. 7035 companion bill: Official congressional records for the 2026 bills and their procedural status.
• Remarks at the Republican National Committee Midterm Convention, September 9, 2026: Official presidential transcript containing the $1,200 family-savings claim.
• White House spokesperson’s October 2026 swipe-fee statement, as reported by NACS: Reproduces the later description of $1,200 as an existing household cost. NACS is a merchant trade organization, not an independent evaluator of savings.

Fees, Forecasts, and Household Data

• Credit and debit swipe fees reach $198.25 billion in 2025: Merchants Payments Coalition release citing Nilson Report figures; provides the credit-versus-debit breakdown. The coalition advocates for fee reform.
• CMSPI: Credit Card Competition Act could result in annual savings upward of $17 billion: Original public statement of the consultancy’s modeled 2024 savings opportunity, inputs, and selected assumptions; not measured post-enactment evidence.
• Total U.S. households and total family households: U.S. Census Bureau estimates presented by the Federal Reserve Bank of St. Louis, used as denominators in sherafy.com‘s illustrative calculations.
• Should Credit Card Fees Be Regulated?: Federal Reserve Bank of Richmond explanation of interchange economics, processing charges, and policy distinctions.

Debit Regulation and Historical Pass-Through

• Federal Reserve’s 2011 Regulation II final-rule announcement: Documents the earlier debit interchange cap and routing requirements, distinct from the 2026 proposal.
• The Impact of the Durbin Amendment on Merchants: A Survey Study: Wang, Schwartz, and Mitchell, Federal Reserve Bank of Richmond, 2014. Original merchant survey documenting uneven cost effects and limited reported price cuts.
• The Costs and Benefits of Half a Loaf: Robert J. Shapiro, 2013. Original 69% pass-through modeling calculation and disclosure of support from the Merchants Payments Coalition.
• The Unanticipated Costs and Consequences of Federal Reserve Regulation of Debit Card Interchange Fees: Robert J. Shapiro and Jerome Davis, Progressive Policy Institute, December 2025. Retrospective finding substantially different from Shapiro’s 2013 estimate; its counterfactual assumptions require evaluation.
• The Impact of Price Controls in Two-sided Markets: Manuszak and Wozniak, Federal Reserve Board, 2017. Evidence of changes in checking-account prices at covered banks.
• Bank Profitability and Debit Card Interchange Regulation: Kay, Manuszak, and Vojtech, Federal Reserve Board, 2014. Finds banks only partially recovered lost debit interchange income through deposit fees.

International and Consumer-Distribution Evidence

• Reserve Bank of Australia: Competition in Card Acquiring Services: March 2026 central-bank review summarizing EU, UK, New Zealand, and Australian evidence on interchange pass-through to merchants.
• Distributional Effects of Payment Card Pricing and Merchant Cost Pass-through in the United States and Canada: Felt, Hayashi, Stavins, and Welte, Federal Reserve Bank of Boston, 2020. Models the different net costs of payment methods by consumer income group; later published in an academic journal.
• Credit Card Banking: Drechsler and coauthors, Federal Reserve Bank of New York, revised August 2026. Account-level analysis of credit-card issuer revenues, rewards, costs, and profitability.
• Credit Card Competition Act: Myths and Facts: Merchants Payments Coalition advocacy document, included specifically to show the present-day use of the 70% claim, not as neutral proof of consumer pass-through.

Editorial currency note: This analysis reflects sources and bill status checked on October 20, 2026. The legislation, network pricing, reported annual fee totals, and rewards programs can change. Future updates should separate observed outcomes from new forecasts.