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Capping Credit Card Fees Threatens To Hurt Consumers and Small Businesses

Lawmakers can’t change the fact that expenses must be offset somewhere.

J.D. Tuccille | 6.24.2026 7:00 AM

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(Illustration: Midjourney)

Two years ago, Illinois passed crowd-pleasing restrictions on credit card interchange fees, which are better known as "swipe fees." The ban on charging fees on processing payments for tips and taxes has now been delayed twice by skeptical federal judges and lawmakers worried that they've crafted a financial mess. These interventions may be saving the state from itself, as a new report points out that the law threatens to hurt consumers, small retailers, and local financial institutions.

You are reading The Rattler from J.D. Tuccille and Reason. Get more of J.D.'s commentary on government overreach and threats to everyday liberty.

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Delayed Ban on Fees for Processing Taxes and Tips

Passed as part of a 2024 revenue bill, the Interchange Fee Prohibition Act (IFPA) defines "interchange fee" as "a fee established, charged, or received by a payment card network for the purpose of compensating the issuer for its involvement in an electronic payment transaction." It adds: "An issuer, a payment card network, an acquirer bank, or a processor may not receive or charge a merchant any interchange fee on the tax amount or gratuity of an electronic payment transaction if the merchant informs the acquirer bank or its designee of the tax or gratuity amount as part of the authorization or settlement process for the electronic payment transaction."

"Although merchants have long advocated for this change, banking and payment industry representatives argue that it........

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