Commentary: Small businesses need relief from rising credit card swipe fees
The past few years have been challenging through COVID-19, labor market issues, and ongoing inflation. I am proud of our local Main Street businesses for weathering the storm and give great credit to our community for helping support our small businesses and their employees.
However, while prices remain high, small businesses need action on rising swipe fees imposed by credit card companies. Credit card swipe fees add up to thousands of dollars a month for many companies, and while processing transactions has only gotten cheaper, these fees continue to rise. It is time that Congress takes action, and I am happy to say there is a bipartisan solution in the Credit Card Competition Act, which Congress must ensure gets a vote.
Running a local restaurant or any small business requires a delicate balance of managing costs while providing service and quality to customers and consumers. And over the past few years, the burden of exorbitant swipe fees has become increasingly unbearable. These fees have risen rapidly and are often hidden from consumers. Merchants paid $126.4 billion in processing fees for credit cards last year alone, an increase of 20 percent from the year prior.
With notoriously low profit margins, local businesses have limited options. They are forced to make tough choices, often compromising on investments and staff hiring. Meanwhile, credit card companies use swipe fees to increase their excessive profits while we all struggle with rising costs.
Congress must take immediate action by passing the bipartisan Credit Card Competition Act. This crucial legislation aims to foster a more competitive credit card processing market, empowering small businesses to thrive in an environment where credit card usage is at an all-time high. And the bill is being supported by new conservative Senator J.D. Vance and longtime progressive champion Senator Dick Durbin. If they can agree on something like the Credit Card Competition Act, you know it must be good for the country. The bill seeks to break the stranglehold of a few dominant credit card companies by providing business owners like myself with an additional routing option when processing credit card transactions. Currently, merchants are only allowed a single network by which to process transactions. This is because major banks accept high credit card swipe fees without negotiation, likely due to the portion of the profits they reap when they force merchants to either pay for excessive swipe fees or forfeit credit card payments altogether. Providing even one additional routing option would encourage innovation and prevent anti-competitive practices while providing much-needed relief to businesses struggling under the weight of excessive swipe fees.
Passing the Credit Card Competition Act is not only beneficial for small Main Street businesses but for the broader economy as well. Reducing swipe fees will allow businesses breathing room at a critical time when inflation is creeping up everywhere and to everyone. The benefits of the Credit Card Competition Act would increase economic activity, help stimulate local communities, and support other businesses in the supply chain.
There is a chance to make this right for small businesses and consumers. Continued inaction is active support for the major financial institutions that continue to levy these fees. It is as simple as that. A bipartisan solution is rare these days, and depending on their vote, lawmakers will show their true colors in the fight between Main Street and Wall Street.
Our downtowns, main streets, and local businesses are the backbone of New Hampshire's economy. It is only fair that credit card companies compete on the same level playing field as the businesses they serve.
As a Granite Stater, I urge our federal delegation, Sens. Shaheen and Hassan, and Reps. Kuster and Pappas, to support the Credit Card Competition Act and push for a vote as soon as possible. Merchants are also counting on the critical support of the Ranking Member of the Senate Banking Committee, Sen. Tim Scott. While he continues to travel to our state seeking our vote for president, it’s important he keeps in mind the issues that are imperative for our small business community and consumers at-large. The time for action is now, and I hope Congress will act with speed.
Mike Castaldo lives in Dover with his wife and three sons. He served in the U.S. Marine Corps -Reserve during the cold war.
This article originally appeared on Portsmouth Herald: Commentary: Small businesses need relief from rising credit card fees
