How EBT card processing fees shape SNAP's food assistance program
The United States Department of Agriculture administers the Supplemental Nutrition Assistance Program, the country's largest food assistance effort, serving roughly 42 million Americans each month. Benefits flow through Electronic Benefit Transfer cards, the magnetic stripe or chip debit devices recipients use at grocery checkout lanes. Behind every swipe sits a small economy of banks, payment networks, and processors, each taking a slice of every transaction. Those fractions of a cent add up to hundreds of millions of dollars a year, and the question of who bears them has become a flashpoint in US federal payments policy.
For readers outside the United States, especially in places like Sydney or Melbourne where electronic welfare delivery is being quietly normalised, the EBT fee debate offers practical lessons. Australian policymakers and researchers examining the Cashless Debit Card, the BasicsCard, or the Indue wallet card can learn from how Washington has argued, litigated, and legislated around merchant costs. Open spending platforms, including Publicspending.net, have begun documenting the underlying payment flows across both countries, making cross-jurisdictional comparisons easier than ever.
What SNAP and EBT actually do
SNAP began as a paper coupon scheme in 1964 and converted to electronic delivery during the 1990s and 2000s, with mandatory conversion completed in 2002. The shift was meant to reduce stigma, cut administrative overhead, and lower fraud. USDA's Food and Nutrition Service pays for roughly 100 percent of SNAP benefits themselves, while states and territories administer eligibility determinations and case management through local offices.
Recipients receive monthly allotments loaded onto personal EBT accounts. The cards work at authorised retailers, including supermarkets, convenience stores, farmers' markets, and increasingly online through approved platforms such as Amazon and Walmart. SNAP benefits cannot be used for alcohol, tobacco, hot prepared food, or non-food items, a restriction enforced through merchant category coding rather than the card technology itself.
The technology stack underneath is similar to commercial debit cards. EBT cards typically route through the Pulse network or the Interlink network, both operated by Discover Financial Services under a federal contract. This routing architecture is one reason fee structures for EBT differ from regular debit purchases, and why merchant groups have lobbied for years to change the arrangement.
How processing fees flow through the payment chain
Every EBT transaction triggers interchange, network, and acquirer fees, the same categories of cost that apply to ordinary debit and credit payments. For SNAP EBT, the federal government historically paid the bulk of these fees through a reimbursement programme administered through state agencies. USDA reimbursed states for a share of merchant swipe fees, effectively insulating grocers from most direct costs.
Over time, federal reimbursement rates have shifted. The Agricultural Act of 2014 capped certain EBT-related fees and required USDA to study alternatives. The 2018 Farm Bill further restructured funding so that federal reimbursements to states for EBT processing became a fixed allocation rather than a percentage of transaction volume. Smaller states and territories, where per-transaction costs run higher, often felt the squeeze on administrative overhead.
The result is a layered payment structure. Retailers pay swipe fees on each EBT transaction, processors pass portions to networks, and states pay their own contractors to manage benefit issuance and dispute resolution. The fee amounts are small on a per-transaction basis, often ranging from a few cents to under fifteen cents, but the cumulative figures reach nine figures annually across all participating states.
The merchants and retailers caught in the middle
Independent grocers, convenience store operators, and rural supermarkets argue they shoulder a disproportionate share of EBT processing costs. The National Grocers Association has repeatedly petitioned USDA and Congress for relief, noting that interchange rates for EBT can exceed those for ordinary debit in some processing configurations. A small shop in regional Australia or in a remote US county operates on thin margins, and every cent lost to fees affects the bottom line.
Merchant advocacy groups point out that while SNAP recipients receive the benefit of price reductions negotiated through wholesale supply chains, the retailers themselves gain nothing comparable from accepting the card. Unlike credit cards, EBT purchases do not generate loyalty revenue, premium consumer data, or rewards for the issuing bank. For retailers in low-income neighbourhoods, SNAP traffic can make up a large share of weekly sales, raising the stakes on cost recovery.
In response, some retailers have experimented with surcharging EBT purchases. The practice is heavily restricted, and federal rules generally prohibit surcharges on SNAP transactions specifically. Litigation in several states has examined whether smaller grocers can pass costs to other customers as a general operating expense rather than a transaction-level surcharge. The boundary between permissible cost recovery and prohibited surcharge remains contested in courts.
Recent litigation and federal rule changes
In 2023 and 2024, merchant groups including the National Association of Convenience Stores filed suit challenging the existing fee structure, arguing that USDA's reimbursement formula failed to keep pace with actual processing costs as contracted through state processors. Federal courts have generally upheld the existing framework, but the lawsuits keep pressure on the agency to revise guidance on what constitutes permissible cost pass-through.
USDA has piloted changes to allow mobile wallet EBT redemption, a move partly driven by the need to reduce card production and replacement costs. Mobile EBT reduces the expense of plastic card issuance and lowers certain authentication fees, although it shifts some costs onto recipients who may lack smartphones or reliable connectivity. In a city like Adelaide, where mobile payment penetration is high, the trade-offs look different from rural Mississippi, where broadband gaps remain a barrier to mobile-only benefit access.
The 2023 omnibus appropriations package included a directive to USDA to study the feasibility of routing SNAP EBT transactions over open-loop networks rather than the proprietary Pulse and Interlink infrastructure. If implemented, the change could shift the fee structure toward interchange rates closer to standard debit, potentially lowering or raising costs depending on negotiation outcomes between Discover, Visa, and MasterCard.
Parallels with Australia's Cashless Debit Card and welfare debit schemes
Australia has run a series of income management and cashless welfare pilots over the past decade. The Cashless Debit Card, deployed in Ceduna in South Australia and across parts of the Northern Territory including Katherine and Tennant Creek, restricts a portion of welfare payments to debit card use only, with restrictions on alcohol and gambling merchants. The program has used Indue Pty Ltd as the card issuer, with fees structured differently from SNAP EBT but raising similar questions about merchant absorption of cost.
The BasicsCard operated in Victoria under a different model, allowing recipients to nominate which portion of their payment is quarantined for essential items. The Indue wallet card, used in the Goldfields region of Western Australia and in parts of Queensland including Bundaberg and Hervey Bay, applies similar income management principles. Each scheme involves payment processing fees, but disclosure of those fees to the public has been patchy at federal and state levels.
Researchers at the Australian National University and the University of Melbourne have called for more transparent reporting on the cost of operating cashless welfare programs. Comparing the Australian schemes with US SNAP EBT processing costs requires comparable data on interchange rates, acquirer fees, and state-level administration overhead. Open data repositories make that comparison feasible in principle, and harmonised datasets would accelerate the work.
Tracking the money through open data
The US federal government publishes SNAP participation statistics monthly, but EBT processing fee data is more fragmented. USDA reports aggregate reimbursement figures, while processor contracts are often shielded as proprietary information. States publish varying levels of detail on their EBT contractors and per-transaction fees, and the picture across fifty states and four territories is uneven at best.
Australia's welfare payment infrastructure is administered by Services Australia, the Department of Social Services, and contracted providers such as Indue. Public reporting on Cashless Debit Card operating costs has come mostly through Senate estimates hearings and Auditor-General reports rather than structured data releases. Comparing the two systems therefore requires stitching together multiple datasets across continents and currencies.
Open spending initiatives that standardise payment data across jurisdictions can help researchers trace flows that agencies prefer to keep opaque. Platforms that pull together federal contracts, state agency spending, and processor disbursements offer a more granular view than any single agency disclosure. For analysts in Brisbane or Canberra, the ability to download harmonised datasets saves weeks of manual reconciliation work and supports more rigorous policy evaluation.
Comparing welfare card fee structures across systems
| Feature | US SNAP EBT | Australian Cashless Debit Card | Indue Wallet Card (WA and QLD) |
|---|---|---|---|
| Issuing body | State agency under USDA contract | Department of Social Services via Indue | Indue under state contracts |
| Federal reimbursement of merchant fees | Partial, capped under 2014 and 2018 Farm Bills | Not disclosed publicly | Not disclosed publicly |
| Network routing | Pulse or Interlink (Discover) | eftpos | MasterCard or Visa debit rails |
| Allowed restrictions | No alcohol, tobacco, or hot prepared food | Up to 80 percent quarantined, with alcohol and gambling blocked | Variable, often alcohol and gambling blocked |
| Mobile wallet support | Piloting in several states | Limited rollout | Limited rollout |
| Merchant fee transparency | Aggregate USDA reimbursement data only | Limited Senate estimates disclosure | Limited Auditor-General disclosure |
The table highlights the uneven disclosure landscape for restricted-payment schemes in both countries. Researchers wanting to compare the actual operating cost of welfare delivery face fragmented records, inconsistent reporting periods, and proprietary contracts held outside the public register. Closing those gaps requires coordinated disclosure standards across federal agencies, state authorities, and contracted processors on both sides of the Pacific.
Bringing transparency to welfare payment processing
Welfare payment programs are typically evaluated on outcomes for recipients, but the cost of moving the money matters just as much for public trust. Researchers, journalists, and policy advocates can use open data platforms to monitor fee structures, vendor contracts, and per-transaction reimbursement rates across multiple jurisdictions. Australians watching the rollout of restricted debit cards in their own communities can learn from how US states publish, or fail to publish, the underlying cost details of EBT processing.
The next step is harmonised data. Cross-jurisdictional repositories that align USDA processor disclosures with Australian Senate estimates returns would let analysts answer basic questions about cost efficiency, vendor concentration, and merchant burden. Until those datasets exist, the cost of welfare delivery will remain partly hidden from the taxpayers and recipients who fund and rely on these systems.
Better data alone will not resolve the policy debates over restricted debit cards or EBT fee structures, but it does give citizens the information they need to participate meaningfully. Open spending platforms that combine federal contracts, state agency disbursements, and vendor reporting offer a starting point for that conversation. The work of building comparable datasets across Sydney, Washington, and beyond is well underway, and researchers with the right tools can accelerate it.