A recent study has highlighted the potential impact of a new Illinois credit card law, indicating that large retailers will benefit significantly, while small businesses may face increased costs. The law, which exempts tax and tip from credit card interchange fees, is projected to result in $118 million in savings. However, 40 of the largest retailers are expected to capture nearly 40 percent of these savings.
Among the top beneficiaries are Amazon, Walmart, Home Depot, Verizon, Apple, AT&T, Costco, CVS, Walgreens, and Kroger. These ten companies alone will receive 21.4 percent of the savings. For approximately 1.3 million small businesses in Illinois, any potential savings could be offset by operational costs related to implementing the new system.
Alex Cabrera from Lalo’s Restaurant expressed concern over the financial burden on small businesses: “This unnecessary law will create significant implications on Illinois business and consumers.”
The study supports findings from a University of Miami report suggesting that similar legislative proposals at the federal level would disadvantage small businesses further by benefiting large retailers with annual sales exceeding $500 million.
Glenn Grossman from Anderson University commented on additional challenges for small businesses: “Small businesses will see an increase in operational costs to account for sales tax and gratuities paid with debit and credit cards.”
The law's impact on consumers also raises concerns. A Richmond Federal Reserve report noted that past changes to interchange fees led to reduced debit card rewards programs and increased banking fees without resulting in lower retail prices.
Jose Garcia of Northwest Community Credit Union warned about potential security risks: “Consumers and businesses in Illinois should be concerned about what the transaction experience will look like from a security and privacy standpoint.”
Set to take effect on July 1, 2025, this legislation makes Illinois a global outlier as it becomes the first jurisdiction worldwide to enact such measures.