Swipe twice? Only Illinois shoppers might face credit-card inconvenience, depending on lawsuit

How Illinoisans use their credit or debit cards could change depending on the result of a lawsuit over certain fees impacted by a new state law. Illinois shoppers may be the only ones in the nation forced to swipe twice for each purchase, or they might see a little savings.

A new lawsuit could affect how every Illinoisan uses a credit or debit card. A federal judge is hearing a case on allowing Illinois lawmakers to ban certain fees on sales taxes and tips.

It’s called an interchange fee. Here are the details.

When you use a credit or debit card, there is a fee, usually around 2%, between your card company and the business you’re at. Illinois is trying to ban this fee on taxes and tips.

Banks and credit card companies argue this will complicate things for merchants and people could be forced to pay with cards twice: once for the purchase and once for the tip or sales tax.

The Illinois Retail Merchants Association is in favor of the change. It says “swipe twice” won’t happen and cardholders and businesses would save money.

“The idea that banning swipe fees would harm consumers is completely false,” association president Rob Karr said in September.

Illinois is the first state to pass such a law so there isn’t an example to look at. If it survives the court challenge, the law will take effect July 1, 2025. Charlotte Taylor, the attorney representing the coalition of banks and credit institutions, says that’s not enough time to comply with the law and avoid penalties.

“People are freaking out because it’s very, very hard to know how you even go about setting up a system” under the new law, and banks would be “subject to these massive civil penalties,” Taylor said.

Interchange fees cover the costs of processing card transactions, are often passed on to consumers in higher prices and help fund credit card rewards programs.

U.S. Sen. Dick Durbin has long been a proponent of reforming fees and is currently spearheading legislation in Congress targeting Visa and Mastercard specifically.

Depending on the outcome of the lawsuit and effects of the law, more businesses might transition to only accepting cash if it’s more convenient.