SWIPE FEES ON TAXES AND TIPS · METHODOLOGY
How we calculated it
Every time an Illinoisan pays by card, banks and card networks charge the merchant a swipe fee (also called an interchange fee) on the full amount, including sales tax the merchant must hand to the government and tips that belong to workers. Here is how we estimate what that costs each year, line by line, with every source linked.
IFRA estimate. Reasonable range: $158 million to $361 million per year. Figures in billions (B) or millions (M) of dollars per year.
Lines marked IFRA estimate are our own assumptions where no published figure exists. We explain each one below. Every other number comes from the source linked beside it.
Step 1: Sales tax paid by card
We start with every state and local sales tax Illinois collected in the most recent full fiscal year. We then set aside vehicle purchases, which are rarely paid by card, and estimate the share of the rest paid with a credit or debit card.
Step 2: Tips paid by card
No agency publishes a statewide total for tips, so we build one from restaurant sales. Sit-down and counter-service restaurants tip very differently, so we calculate each separately using three questions: How much is sold? How much of that is on checks where the customer added a tip by card? And what is the average tip?
| Line | Value | Amount | Source |
|---|---|---|---|
| Illinois restaurant and foodservice sales | — | $51.70B | National Restaurant Association3 |
| Share at eating and drinking places | 79.5% | $41.10B | National Restaurant Association (share of foodservice jobs, used as a proxy)3 |
Full-service restaurants (sit-down, table service)
| Line | Value | Amount | Source |
|---|---|---|---|
| Full-service sales | 45% | $18.50B | IFRA estimate |
| Sales on checks tipped by card | 75% | $13.87B | Toast5 |
| Tips added on card (average tip) | 19.2% | $2.66B | Toast4 |
Quick-service restaurants (counter service, fast food, coffee)
| Line | Value | Amount | Source |
|---|---|---|---|
| Quick-service sales | 55% | $22.61B | Calculated (remainder) |
| Sales on checks tipped by card | 25% | $5.65B | IFRA estimate (Toast reports 49%; we used about half)5 |
| Tips added on card (average tip) | 15.8% | $0.89B | Toast4 |
| Total restaurant tips paid by card | $3.56B |
Step 3: The swipe-fee rate
Credit cards carry much higher swipe fees than debit cards, so we blend the two by their share of card spending. We use only the percentage part of the fee, the part that grows with the dollar amount. Most cards also carry a flat charge per swipe, which doesn't change when tax and tips are removed. Leaving it out keeps our estimate conservative.
| Line | Value | Source |
|---|---|---|
| Credit cards' share of card spending | 54.5% | Nilson Report6 |
| Credit card swipe-fee rate | 2.25% | Based on the 2.36% Visa/Mastercard average, reduced to remove the flat per-swipe charge7 |
| Debit card swipe-fee rate | 0.30% | IFRA estimate based on Federal Reserve data8 |
| Blended swipe-fee rate | 1.36% | Calculated |
The result
| Line | Card dollars | × Rate | Swipe fees |
|---|---|---|---|
| Sales tax paid by card | $14.21B | 1.36% | $194M |
| Restaurant tips paid by card | $3.56B | 1.36% | $48M |
| Total, every year | $17.77B | 1.36% | $242M |
Our assumptions, and how much they matter
Five numbers in this estimate are our own judgment calls. Here is each one, the reasoning behind it, and how far it moves the total.
| Assumption | Used | Why | Effect on total |
|---|---|---|---|
| Share of sales tax from vehicle purchases | 15% | No published breakdown. Vehicles are a large share of taxable sales and are rarely bought by card. | Each 5 points ≈ $12M |
| Share of other taxable sales paid by card | 70% | Cards made up 65% of consumer payments by number in 2024.2 Card purchases tend to be larger, so the share by dollar value is likely higher. Business-to-business sales use cards less. | Each 10 points ≈ $28M |
| Full-service share of restaurant sales | 45% | Rough industry split between sit-down and counter-service restaurants. | Small |
| Quick-service checks tipped by card | 25% | Toast reports 49%.5 We used about half to stay conservative. | Using 49% adds ≈ $12M |
| Debit card swipe-fee rate | 0.30% | Big-bank debit fees are mostly a flat charge per swipe, while small-bank fees grow with the purchase. 0.30% blends the two. | Small |
With all five set at the low end, the total is about $158 million. At the high end it is about $361 million. The $242 million figure is the middle case.
What we left out
Illinois law defines the taxes covered as any use, occupation or excise tax imposed by the State or a local government. To keep the estimate conservative, we counted only sales taxes the state collects and restaurant tips. We did not include:
Taxes collected directly by cities and counties, such as Chicago's restaurant tax
Cigarette, liquor and cannabis excise taxes
The state motor fuel tax
Tips outside restaurants: salons, barbershops, hotels, delivery and rideshare
The real cost is very likely higher than $242 million.
How this compares
A study paid for by the Electronic Payments Coalition, the banks and card networks that oppose the law, put the figure at $118 million a year. That study counted sales tax only. Retailers have pointed out that it left out tips and excise taxes. Even the industry's own number is well above $100 million a year.
Sources
Illinois Office of the Comptroller, Sales Tax Revenue by Source, Fiscal Year 2026. Includes all state and locally imposed sales and occupation taxes processed by the state.
Federal Reserve Financial Services, 2025 Diary of Consumer Payment Choice. Credit cards were 35% and debit cards 30% of consumer payments in 2024.
National Restaurant Association, Illinois State Fact Sheet (2024 data): $51.7 billion in sales; 465,500 of 585,400 foodservice jobs at eating and drinking places.
Toast, Restaurant Trends Report, Q3 2025: average full-service tip 19.2%; quick-service 15.8%.
Toast, Restaurant Trends Report, Q1 2024, as reported by LendingTree: 75% of full-service and 49% of quick-service customers tipped by card or digital payment.
Nilson Report, Merchant Processing Fees in the United States – 2025: credit cards were 54.54% of U.S. card purchase volume.
Merchants Payments Coalition, citing the Nilson Report, as reported by The Motley Fool: average Visa/Mastercard credit interchange rate of 2.36% in 2025.
Board of Governors of the Federal Reserve System, 2023 Interchange Fee Revenue, Covered Issuer Costs, and Fraud Losses Related to Debit Card Transactions (December 2025).
Interchange Fee Prohibition Act, 815 ILCS 151/150-5 (definitions).
Digital Transactions, “Who Will Benefit Most Becomes the Latest Flash Point in the Battle Over the Illinois Interchange Law”.
Estimate prepared by the Illinois Fuel & Retail Association. Last updated October 2026. Figures are rounded. Swipe fees here mean interchange fees, the portion of card-processing fees set by card networks and paid to the card-issuing bank.