Federal Entities Balance Costs and Benefits of Payment Card Use

Federal entities across the United States increasingly rely on payment cards for transactions with the public, balancing the benefits of convenience and efficiency against the cost of transaction fees. In fiscal year 2023, more than 85 federal entities accepted credit, debit, and other types of payment cards, collectively handling over $43 billion in revenue. However, they incurred about $784 million in associated fees, averaging roughly $1.06 per transaction.

The Department of the Treasury’s Bureau of the Fiscal Service managed payment card acceptance for approximately 81 of these entities, processing 153 million transactions that generated $18.6 billion in revenue while paying $312 million in fees. Other federal entities, including Amtrak and the U.S. Postal Service, independently managed their card relationships, accounting for 590 million transactions and $25 billion in revenue, with $472 million spent on fees. On average, the fees represented 1.8% of total revenue, aligning with typical merchant fee ranges in the private sector.

Efforts to control costs have been uneven across agencies. Several entities reported successfully reducing fees by negotiating lower rates through higher transaction volumes or by limiting the types of cards and transaction amounts they accept. Nevertheless, some agencies faced difficulties, citing complex card network rules and unsuccessful attempts to negotiate lower interchange fees. Interchange fees, largely dictated by networks such as Visa and Mastercard, made up nearly 90% of total fees paid.

Beyond cost management, federal entities emphasized the operational advantages of card acceptance. Payment cards streamline transactions, decrease the need for handling cash and checks, and improve customer service by aligning with consumer payment preferences. Additionally, federal employees using government-issued payment cards, primarily through the GSA SmartPay program, helped agencies control spending and reduce administrative costs. These purchases generated $488 million in rebates during FY 2023, based on $37 billion in net eligible expenditures.

The Government Accountability Office conducted this analysis to evaluate the financial impact of payment card use among federal entities, as well as to identify steps taken to manage these costs and understand the broader benefits. The study included data from major agencies like the Treasury’s Bureau of the Fiscal Service, Amtrak, the Smithsonian Institution, and the U.S. Postal Service, among others.

Article by multiple RFHC contributors, based upon information from the Government Accountability Office (GAO-25-107298)

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