How Swipe Fees Are Fueling A Colorado Debt Crisis

February 01, 2025

Coloradoans are not just suffering with the cost of living; they’re suffering with the cost of owing.

The average Colorado household has accumulated nearly $7,000 in credit card debt. In cities like Colorado Springs, the average household is faring even worse, amassing $13,859 in credit card debt, according to a recent study by WalletHub.

On top of credit card debt, Coloradans collectively owe nearly $30 billion in student loans, with about 773,000 borrowers — roughly 13% of the state’s population — carrying this debt. Medical debt is close behind, with the Consumer Financial Protection Bureau (CFPB) reporting that 12% of Colorado’s population owes a combined $1.3 billion in medical debt.

While this debt crisis may seem insurmountable, addressing an often-overlooked contributor to the crisis — swipe fees — could make a big difference for families across the state.

Swipe fees are costs charged to retailers by major payment processing companies like Visa and Mastercard, and Discover on credit card transactions. They typically range from 1% to 2%, and payment processing companies can charge up to 4% per transaction for rewards cards.

Retailers pass on these fees — an astounding $224 billion every year — to consumers in the form of higher prices. The result? The average Colorado household pays an extra $1,100 annually on purchases made with their credit cards. For those who struggle with credit card debt, these fees can add up.

But as credit card debt rises, big banks continue to aggressively market luxury rewards cards that fuel the crisis. And those credit card rewards are funded by — you guessed it — swipe fees.

Consider Capital One as an example. In 2023, Capital One Financial Corp. poured over $4 billion into marketing — a 15% increase from the previous year. A large percentage of its marketing budget went toward promoting its credit cards’ flashy perks and reward promotions that often come with complex terms that encourage even more spending.

Capital One’s Venture X card, for instance, offers an enticing 75,000 bonus miles and unlimited 2x miles rewards upon signup. But to unlock these rewards, consumers must spend at least $4,000 within three months. Additionally, cardholders are also required to pay a $495 annual fee, compounding their financial burden beyond the initial purchases necessary to reap the card’s benefits.

This type of carefully crafted marketing strategy by credit card issuers perpetuates the illusion of a luxurious lifestyle that is easily attainable by simply buying more with your credit card. The results speak volumes: two out of every three Americans with debt continue to pursue the same rewards credit cards that contributed to their financial struggles in the first place.

Fortunately, there’s a way to turn the tide. The Credit Card Competition Act (CCCA), a bipartisan bill introduced in Congress, aims to reduce swipe fees for retailers and consumers by breaking up the Visa-Mastercard duopoly that dominates the credit card processing market and allows those two companies to set ever-increasing fees.

Limiting swipe fees could also have an important side effect: curbing aggressive credit card marketing campaigns by big banks that can help rein in the debt crisis in Colorado and across the nation. By injecting much-needed competition into the payment processing industry through the CCCA, Mastercard and Visa will finally be forced to rethink their aggressive swipe fee hikes.

In addition to the Credit Card Competition Act at the federal level, Colorado lawmakers can also consider reforms at the state level to begin relieving the swipe fee burden. This would follow in Illinois’s footsteps, where lawmakers recently passed the Interchange Fee Prohibition Act, which prohibits Visa and Mastercard from charging swipe fees on sales tax and tips.

For too long, swipe fees have quietly squeezed hardworking families and Main Street businesses, compounding the financial challenges they face daily. Colorado lawmakers have a chance to lead by example. It’s time to help ease the mounting debt crisis and pave the way for a stronger, more equitable economic future by finally reforming our broken swipe fee system.

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. We work with consumer advocates, businesses, think tanks, economic experts and others to raise awareness and inform discussions about the current and future policy challenges of new technology. We serve as a resource for lawmakers to help them develop modern policy solutions that benefit all Americans by expanding consumer freedom, allowing businesses to best serve their customers and preserving free market competition.