Texas lawmakers are considering following in Illinois’ footsteps with anti-swipe fee legislation. Clearly, when looking for common-sense, free-market solutions, copying Illinois Democrat Governor J.B. Pritzker is the first thing you’d expect Texas Republicans to do.
But before Texas runs off into the sunset chasing this shiny new regulatory policy, here’s why mimicking Illinois on this issue would be about as smart as putting a “No Trespassing” sign on the Alamo.
The “Benefit” of Paying More
First, let’s discuss how much capping and regulating interchange fees will “help” consumers. In Illinois, lawmakers decided to ban certain swipe fees. Unfortunately, when merchants face higher processing fees, they don’t just swallow the cost like a cowboy at a chili cook-off.
Spoiler alert, Texas: They pass those costs on to consumers.
So, if you pass these bans, congratulations, Texas—you’ll be paying more for your BBQ and that cold beer every time you use that credit card, hoping to score some cash back or a few airline miles. After all, who doesn’t want to pay more at the register in today’s economy?
Choking Off Innovation, One Regulation at a Time
Now, let’s move on to something that might be harder for folks to grasp: innovation. Swipe fees aren’t just a cash grab by the banks; they help fund things like fraud protection, payment system upgrades, and new technology.
So, if Texas and a host of other American states decide to play follow-the-leader and cap these fees, well, get ready for less innovation from our banks and financial institutions. But hey, if you’re into the idea of still using checks in the grocery line or hoping your card doesn’t get hacked, maybe this is the future you’ve been waiting for after all.
The Small Business Squeeze Gets Tighter
Let’s not forget small businesses that keep Texas running. They deal with enough taxes and red tape as it is. Big box stores will adapt; in fact, they’re the ones pushing it across the nation. But this will crush small businesses that don’t have the same bargaining power or point of sale systems that can bifurcate transactions.
The result is that small businesses will be forced to change their point-of-sale systems to those that can absorb those changes. Sounds expensive, doesn’t it? We would also be remiss if we failed to mention small businesses’ reliance on credit card rewards for purchase orders—adios to those.
Imagine a family-owned taco joint in San Antonio that barely survived recent inflation, now faced with the cost of upgrading a payment system they didn’t ask for. They don’t have a legal team. They have a lunch rush. This policy could be what shuts their doors.
Banks Won’t Swallow the Costs. You Will.
Let’s talk about the banks and financial institutions that make everything tick. Texas lawmakers might think capping swipe fees will only harm the big, bad stakes. But think again.
Those swipe fees help banks provide credit, manage fraud, and keep the system running smoothly. By limiting those fees, banks are going to have to find another way to make up the lost revenue, perhaps with higher fees on accounts or cutting back on services. So, if you think consumers like paying higher bank fees or dealing with fewer options, then this is definitely the policy for you. Just remember, the next time you get a hefty service charge on your checking account, you can thank Illinois for the brilliant ideas.
Even Illinois Is Trying to Undo Its Own Mess
Currently, Illinois Democrat Rep. Margaret Croke is attempting to repeal the swipe fee legislation they just passed last session.
Why, you ask? Illinois created and passed such a spectacularly flawed policy that its creators are running for the hills. Banning swipe fees was barely off the ground in Illinois, and its former supporters are backpedaling to undo the mess they’ve created. Classic Illinois.
So, rather than point and laugh at the Land of Lincoln, is Texas really going to say, “Hold your horses, Illinois, we’re pretty fond of state law blunders too”?
Clearly, banning swipe fees sounded like a great campaign talking point. Lawmakers thought they were helping the little guy and business owners. But, like most things in Illinois, the idea didn’t match reality. Small businesses are now being hit with extra costs, and guess who gets to deal with the consequences? That’s right, the consumers. If Illinois were a sitcom, this would be the plot twist everyone saw coming—apparently, everyone but Texas.
Don’t Let Texas Be the Punchline
So, Texas, take notes, you have a freedom-loving reputation to protect.
Texas doesn’t need to borrow bad ideas. It doesn’t need to play copycat to Illinois’ chaos. And it certainly doesn’t need to make consumers pay more—just to say it did something.
Keep Texas smart. Keep Texas free. Skip the swipe fee nonsense.