Why Tap-to-Pay Costs Stores More Than You Think

Tap-to-pay feels free to the customer. To the small business at the other end of the tap, it is one of the most expensive ways to take money. Each card transaction carries interchange + assessment + processor fees averaging around 2.35% in the US. Premium reward cards charge higher fees. The Honor All Cards rule historically meant merchants had to accept them. US merchants paid a record $187.2 billion in card swipe fees in 2024 — up roughly 70% since 2020. The reward in your wallet is funded by the shop you bought from. KEY POINTS • US merchants paid a record $187.2 billion in card swipe fees in 2024 — up roughly 70% since 2020. • The average US credit card interchange rate is approximately 2.35% of every transaction. • Card processing fees now exceed the entire profit margin of many small retailers. • The reward in your wallet is funded by the shops that have to accept your card. • Premium reward cards earn their rewards by extracting higher fees from the merchants who must accept them. • The Honor All Cards rule historically meant merchants who accepted Visa had to accept every Visa card. KEY FACTS • Average US credit card interchange rate: ~2.35% of transaction value (Nilson Report 2024). • US merchants paid ~$187.2 billion in combined credit + debit card swipe fees in 2024. • Card swipe fees grew approximately 70% between 2020 and 2024 — faster than transaction volume, wages, or inflation. • Card processing fees often exceed profit margins for many small retailers. • Swipe fees are split between interchange (paid to issuing bank) and assessment / network fees (paid to Visa or Mastercard). • Premium reward cards charge higher interchange fees than standard cards. • The Honor All Cards rule historically required merchants to accept all Visa and Mastercard cards or none. • The November 2025 settlement proposal would allow merchants to choose card categories. • Interchange fees typically range 1–3% of transaction value. • The MDL 1720 antitrust litigation has been ongoing for nearly two decades. CHAPTERS 00:00 The cashier sigh you might have missed 01:15 How the swipe fee actually works 02:45 Interchange, assessment, processor — who gets what 04:30 The Honor All Cards rule 06:00 Why premium cards cost stores more 07:30 Who actually pays for your card rewards 09:00 $187 billion in 2024 10:30 What the 2025 settlement might change 12:00 What the cashier was thinking FAQ Q: Why do merchants dislike tap-to-pay? A: Card transactions carry interchange, assessment, and processor fees averaging around 2.35% in the US. For many small businesses, those fees can exceed their daily profit margin. Premium reward cards charge even higher fees, and under the Honor All Cards rule, merchants historically couldn't refuse them. Q: How much do US merchants pay in swipe fees per year? A: US merchants paid approximately $187.2 billion in combined credit and debit card swipe fees in 2024 — roughly 70% higher than in 2020. Q: Who pays for credit card rewards? A: Card rewards are funded primarily by the merchants who must accept the cards. Premium reward cards charge higher interchange fees than standard cards. Those fees are paid by the shop, then folded into prices that all customers — including those who carry basic cards or pay cash — end up paying. Q: What is interchange? A: Interchange is the largest slice of the card swipe fee. It is paid by the merchant's bank to the bank that issued the customer's card. The card network (Visa, Mastercard) sets the interchange rates and takes a separate, smaller assessment fee on top. SOURCES • Payments Dive — Merchants assail card fees pact (Dec 2025) — https://www.paymentsdive.com/news/mer... • Merchants Payments Coalition data, cited via Payram analysis — https://payram.com/blog/visa-masterca... • JD Journal — Visa and Mastercard $38B Settlement Coverage (Nov 2025) — https://www.jdjournal.com/2025/11/11/... • Payram analysis of MDL 1720 Settlement — https://payram.com/blog/visa-masterca... • America's Credit Unions — Settlement Coverage (Nov 2025) — https://www.americascreditunions.org/... • McGraw-Hill — Visa, Mastercard $200B Deal Coverage (Dec 2025) — https://www.mheducation.com/highered/... • Senate Judiciary Committee Hearing — November 19, 2024 — Chris Callahan / Doug Kantor testimony