We are back for another installment of financial literacy month in which those of us in the industry learn what makes the gears turn. Last week, I took a look at stablecoins, a confusing topic, but one that is at the top of many conversations among credit unions (and other pertinent parties).

If stablecoins were a major topic of discussion at the 2026 Governmental Affairs Conference, another topic at forefront was that of interchange. Let’s get down to business.

How interchange works

We will get into the latest developments, but let’s get a quick recap on what interchange is and how it works. Said briefly, interchange is part of the fees associated when you use your card to buy something.

For example, you the consumer make a $100 purchase of bubblegum. The store/merchant does not get the full $100 though. A small percentage (typically 1-3% and sometimes in addition to a flat per transaction fee of $0.05-0.65) is charged to the merchant by the parties that facilitate that transaction: the merchant’s financial institution, the credit card network, and the card issuer.

Supposing for our example the fee is 2%, that means $98 will go to the merchant, the rest are associated fees. That remaining $2 gets broken down between the merchant’s financial institution as an acquirer fee, the credit card network as an assessment fee (e.g. Visa, Mastercard, etc.), and to the card issuer (i.e. the credit union) as an interchange fee.

And that interchange fee, added up over thousands and millions of transactions, can be a substantial part of a credit union’s revenue.

Why do all these swipe fees exist? 

Part of it is because of the inherent costs of managing the payment networks. There’s also the associated costs of credit risk—the fraud prevention programs required of networks and issuers to deal with prevention and settling fraud.

What can be confusing, though, is that the rate and/or fee is not necessarily the same across a single payment network. There might be different rates for the type of card, transaction, or card tier. And while non-negotiable, the reality is that if you’re a big enough retailer, you have the power to negotiate lower fees.

The truth is that using a card is not free. The network and issuers have costs, and they recuperate those costs via swipe fees. Cards are a convenient and expected way of receiving payment, so merchants who want to accept cards pay to run those transactions. And while this is technically the merchant’s burden to bear, what’s to stop them from baking those costs into the price of their goods and passing them along to the consumer?

Durbin works to change interchange

This question was the impetus for U.S. Senator Richard Durbin (D-IL) to introduce the Durbin Amendment as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act in 2010. In the amendment, he worked to restrict interchange fees, specifically for debit cards. The amendment would eventually settle on reducing transaction fees to $0.21 plus 0.05%, but only for banks over $10 billion in assets.

Durbin’s hope was that by capping interchange fees, the savings to merchants would be passed on to consumers in the form of lower prices. The results, however, have been hotly debated.

Still unhappy with the profits the payment networks were generating, and the associated costs being passed down to consumers by merchants, Durbin would later work on and introduce the Credit Card Competition Act, most recently reintroduced in 2026 (after past failures to advance).

In the January 2026 reintroduction, Durbin said, “Americans are struggling with everyday purchases like groceries and gas, and credit card swipe fees inflate those already exorbitant prices. By bringing real competition to credit card networks, which is currently dominated by the Visa-Mastercard duopoly, we can reduce swipe fees and hold down costs for Main Street merchants and their customers.”

Senator Roger Marshall (R-KS), who co-sponsored the bill, said, “The average American family is being ripped off by Big Banks, who profit billions from swipe fees while hardworking Americans pay the price. It’s time to bring real competition to a credit card network market dominated by Visa and Mastercard — and drive down the cost of everyday goods. The American Dream doesn’t work when the system is rigged, and this bill helps level the playing field. I’m grateful to have President Trump’s support, and I look forward to working with Senator Durbin to get this across the finish line.”

What’s more, since I last wrote about this topic, individual states have gotten involved and passed their own related bills, starting with the Interchange Fee Prohibition Act in Illinois, 2024. This legislation prohibited how interchange fees were assessed, limiting the fees to only the base cost of the goods sold, not the taxes and tips on top of it. And other states are catching on, with thirty others introducing legislation.

America’s Credit Union’s response

Though much of the existing legislation proposed only affects the largest financial institutions in the country, as the largest credit unions continue to grow, it could become an even bigger concern for the industry.

What’s more, while some of the legislation out there targets parts of the fee, America’s Credit Unions warns that the bills being introduced are growing broader and bolder in scope, and may affect fundamental aspects of how they work.

ACU has argued that the legislation, particularly the Durbin-Marshall mandates, rely on flawed logic, expecting windfalls for consumers, but those savings passing on to others. Of the 2010 amendment which affected debit cards, “Consumers did not receive promised price reductions at the checkout line while debit card fraud increased by 60% – affecting consumers, small businesses and financial institutions.”

So not only did consumers see no cost benefits, the changes hurt them in the long run, they argue. And by continuing to hammer in changes, the legislation risks increased fraud, reduced access to credit, and savings for retailers, not consumers. ACU has written many letters to this tune as it has fought hard to shut down the legislation, available from their website.

What comes next is anybody’s guess, though it does seem that momentum is building for changes to come. Whether that will end up hurting consumers and credit unions is unknown, but if you are worried, it may be time to speak out against it.