Interchange shake-ups threaten credit access and security

Illinois credit unions earned a 12-month breather when state lawmakers voted to delay the enactment of the Interchange Fee Prohibition Act (IFPA) last month. The Illinois General Assembly voted overwhelmingly—103-9 in the House and 52-4 in the Senate—to postpone the effective date of the state's Interchange Fee Prohibition Act by one year, moving it from July 1, 2025, to July 1, 2026.

Illinois Gov. J.B. Pritzker's signature extending the deadline gives courts and lawmakers more time to resolve challenges to the law. If it were to take effect, the IFPA would bar financial institutions and payment networks from charging interchange fees on the tax or gratuity portion of card transactions and require a complicated new system to comply.

The interchange fight in Illinois is just one example of the ongoing challenges to the card payments system, both at the state and federal levels. These proposed changes would unnecessarily upend an effective and efficient card payments system with uncertainty and reduced access to credit for millions of Americans.

What interchange really is

Every time a member taps a debit or credit card, the merchant's financial institution remits a small fee—interchange—to the issuing institution. That fraction of a cent covers real-time authorization, guarantees the merchant is paid even if fraud later surfaces, funds zero liability protection for cardholders, and underwrites programs members value, such as rewards.

Because payment cards cross state lines with virtually every use, credit union leaders say the electronic payments system only works when there is one rulebook. Using a single federal interchange framework spares card issuers from having to reengineer software, fee schedules, and fraud controls 50 different ways to reflect individual state rules.

Data backs up concerns

A May 2025 University of Miami finance study concludes that cutting interchange—whether through the Illinois law, similar state bills, or potential federal legislation—"would lead to reduced access to credit, particularly in smaller communities and low-income households."

This is because smaller issuers must curtail credit limits and new-card approvals when a core revenue source shrinks.

The Illinois IFPA threatens the security of the card payments system while also leaving consumers with less access to credit as fewer issuers are able to offer credit card programs—hurting those who need access most.

Carrie Hunt, chief advocacy officer at America's Credit Unions, warns: "Should this law go into effect, it would be impossible to comply with and would upend how payments operate for everyone who does business in Illinois."

Protect members' access to credit

With more than two dozen states considering various legislation this year that could impact interchange, this issue is far-reaching. Extending interchange caps, creating complicated exemptions, or taking choices away from consumers so big box retailers can choose the cheapest option for credit card processing, all of these potential changes to credit card interchange have a broad impact. These changes would allow select merchants to pocket billions in savings and leave consumers, small businesses, and financial institutions at risk.

In addition, there is still a threat at the federal level with the Credit Card Competition Act. Credit unions can take concrete steps:

1. Document real costs now. Quantify potential branch impacts to strengthen advocacy. Collect stories from members about how the payments system works for them.
2. Educate members. Explain interchange in plain language and why access to credit is important.
3. Coordinate advocacy. Utilize resources from America's Credit Unions and leagues to reinforce advocacy efforts. Share insights with other credit unions—within your own state and others facing similar issues—to bolster unified efforts. Address interchange with state lawmakers proactively to help stop legislation before it gains traction.
4. Monitor litigation. With the legal challenge to Illinois' state law still active despite the delayed effective date, America's Credit Unions will provide updates on arguments and decisions to keep credit unions informed, and consider additional filings as needed.

The calendar has extended a year for the Illinois fight, but the threat is also growing: unless the courts—or lawmakers—scrap interchange legislation like Illinois' swipe-fee carve-out, credit union members could see less access to credit and less financial security.

Additional resources: 

Learn more about interchange advocacy resources.

Find out how you can engage your credit union and take action.