ELGIN – State Senator Cristina Castro celebrated a federal court’s recent decision upholding the Illinois Interchange Fee Prohibition Act, paving the way for Illinois to become the first state in the nation to ban financial institutions from charging electronic processing fees on the tax and tip portions of credit and debit card transactions.

“This initiative will benefit small businesses and consumers across the state,” said Castro (D-Elgin). “This law sends a clear message that Illinois will not waver in its commitment to safeguard the pocketbooks of our hardworking residents, and it will deliver the largest relief for Main Street businesses in decades.”

The Castro-backed measure – which was signed into law in 2024 as part of House Bill 4951 – will prohibit financial institutions from charging interchange fees – commonly known as “swipe fees” – on the tax and tip portions of debit and credit card transactions in Illinois.

Currently, retailers pay swipe fees on the base price of an electronic transaction and on the sales tax they collect for the state. These are hidden costs paid by merchants to banks and credit card companies for processing card transactions. The Interchange Fee Prohibition Act responds to these hidden costs, aiming to provide relief for customers at the checkout and promote economic fairness for merchants, retailers and small businesses across Illinois.

“The importance of ensuring transparency for consumers by removing hidden costs cannot be understated,” said Castro. “I’m pleased this ruling will allow us to use all the tools we have available to help bring down the cost of living for working families.”

The Interchange Fee Prohibition Act will go into effect July 1, 2026.