Oversight of Federal Payment of Interchange Fees: How to Save Taxpayer Dollars: One Hundred Eleventh Congress, Second Session, Special Hearing July 12, 2010

Credit and debit cards are rapidly replacing cash and checks in today’s economy, accounting for more than one-half of all retail sales in America, and that percentage is growing. Credit and debit cards are also used to buy nearly $30 billion a year in goods and services from our Federal Government. There are benefits to being able to use plastic for transactions, but there are also some consequences. Visa and MasterCard control 80 percent of the credit and debit card markets, and they have established a system of fees and rules that apply to every transaction conducted across their networks. Every time a credit or debit card sale is made, Visa and MasterCard take a cut of the transaction amount. Some of this cut they keep, but most of it is routed along to the bank that issued the card used in the transaction. This fee that they give to the card-issuing bank is called the interchange fee.