Illinois Passes Interchange Fee Prohibition Act Banning Swipe Fees on Taxes and Tips

Illinois has enacted the Interchange Fee Prohibition Act, legislation that bars credit card companies from charging swipe fees on sales taxes and tips within the state.

The measure targets a widespread industry practice where payment processors charge interchange fees—the per-transaction costs paid by merchants to card networks and banks—not only on the base purchase amount but also on the additional tax and gratuity amounts added to transactions.

According to the legislation's supporters, the change is expected to save Illinois residents hundreds of millions of dollars annually. The law represents a common-sense adjustment to fee structures that many residents and businesses view as duplicative charges on amounts they don't control.

The act was signed into law on March 11, 2026. Illinois becomes a notable state in addressing this specific fee practice, though the effective date for implementation and any transition periods for payment processors have not been detailed in available information.

Supporters of the legislation, including advocates for consumer and small business interests, argue the prohibition will provide meaningful financial relief during a period when many Illinois families and businesses are managing tight budgets.