As giving season arrives, calls for an end to swipe fees on donations

As the holidays approach, giving season arrives as well.

According to National Philanthropic Trust, Americans donated $557.16 billion to charities in 2023. A large majority of donors – 64% – prefer to donate using credit or debit cards, NPT reports. As a result, credit cards companies receive a cut of the transaction in the form of swipe fees, which can be as much as $3 a transaction, according to Motley Fool. Those fee funds then do not make it to charities the donor intended it for.

For example, the American Red Cross raised about $3 billion in 2023. Of that, nearly 91% of donations went directly to help people in need. If an estimated 63% of Red Cross donors paid with credit cards, at an average 2.5% swipe fee, more than $31 million would have been diverted to banks instead of the charities of choice.

According to analysis from Giving USA, the Red Cross and NerdWallet, credit card companies made as much as $5.89 billion in fees on charitable donations to groups providing disaster relief and other humanitarian-related services for events including Hurricanes Helene and Milton.

“Everyone is impacted by the Visa/Mastercard duopoly and unfortunately disaster victims are no exception. Instead of providing critically needed relief, millions of dollars in cash donations go straight to big banks and credit card companies," Joe Kefauver, senior advisor to Americans For A Modern Economy, said.

According to its website, Americans For A Modern Economy is "committed to ensuring that local, state, and federal policies reflect changing technologies that are reshaping the way consumers, businesses and communities operate in the 21st century economy."

In April 2022, Visa and Mastercard increased swipe fees by $1.2 billion despite calls from a bipartisan group of U.S. senators not to do so, as The Center Square previously reported. The senators argued that the increase would worsen already severe inflationary pressures, as swipe fees increase with inflation.

Kefauver said banks should waive credit card fees for charitable donations.

"Instead of making a cursory donation from their foundation, big banks should consider exempting these critical donations to non-profits from their arbitrary swipe fees so more of people’s donations can go where needed,” he said.

There's also a bipartisan piece of legislation in Congress that would create more competition in the credit card industry and bring such fees down, supporters argue.

The Credit Card Competition Act "would require the largest credit-card issuing financial institutions in the country – those with assets over $100 billion – to enable at least two credit card networks to be used on their credit cards instead of just one, and at least one of those networks must be a network other than the Visa/Mastercard duopoly," a summary of the act from U.S. Sen. Dick Durbin, D-Illinois, says. "In other words, after a transition period during which the Federal Reserve would write implementing regulations, the giant banks that issue the overwhelming majority of Visa and Mastercard credit cards would have to choose a second competitive network to go on each card, and then a merchant would get to choose which of those networks to use to process a transaction."

While many banks oppose the proposed legislation, a survey by the Merchants Payments Coalition found that a majority of Americans support the Credit Card Competition Act.

"According to the survey, 55% of likely voters in this fall’s general election support the CCCA while only 7% oppose it, and 38% are unsure," a news release accompanying the survey says. "Supporters outnumber opponents by nearly 50 percentage points."