The fight over credit card swipe fees enters a new year with no end in sight

Swipe Fees: The Hidden Cost of Your Card Swipe

Small businesses are finally catching their breath as inflation cools and the hiring frenzy slows, but another financial headache is growing—credit card swipe fees. As more customers ditch cash in favor of plastic, businesses like Walter’s Hot Dogs in New York are getting squeezed by rising transaction costs. Owner Gene-Christian Baca shells out a staggering $50,000 annually just to cover credit card processing fees, which now eat up about 3% of his total sales.

Credit card swipe fees—payments businesses make to banks and card companies every time a card is used—have been climbing steadily. While debit card swipe fees are capped at 21 cents per transaction, credit card fees can be much higher. With digital payments skyrocketing to 32% of all U.S. transactions in 2023 (up from 24% in 2019), and Visa alone accounting for over half of credit card spending, businesses are feeling the pressure. Merchants paid an average of 2.26% in swipe fees in 2023, with Visa and Mastercard raking in over $100 billion in fees that year. And with Visa raising its fees again in 2024, small businesses fear the extra costs will eventually be passed down to consumers.

Retailers and restaurants are fighting back in different ways. Some, like Patz Deli in New Hampshire, add a 4% “convenience fee” for credit card payments to offset processing costs. Others, like Walter’s Hot Dogs, simply absorb the fees into their prices. The Merchants Payments Coalition argues that these swipe fees cost the average family more than $1,100 a year and is lobbying for increased transparency and competition in the industry. Meanwhile, Visa defends its fees, claiming they make transactions more secure and convenient.

The battle over swipe fees has reached Washington, where the stalled Credit Card Competition Act seeks to introduce more competition into the credit card processing industry. Banks and credit card networks oppose the bill, warning that it could hurt small businesses and eliminate popular consumer rewards programs. With no clear resolution in sight, small business owners, lawmakers, and consumers remain locked in a tug-of-war over who should ultimately bear the cost of card payments……..[read more]

Rising Dough

If small businesses are forced to raise prices due to increasing credit card fees, how might this impact consumer spending habits, business competition, and the overall economy?