While most of my customers are unaware, I have seen firsthand the negative impact that swipe fees have on my business's overhead costs.
Swipe fees are the fees merchants pay every time a customer uses a credit card to make a purchase. These fees average over 2% of the transaction total, and they are charged by the credit-card companies and the banks that issue the cards.
These fees are not transparent to consumers, but for small businesses like mine, these fees can add up quickly and eat into already-slim profit margins. In fact, swipe fees are one of the biggest expenses we face, and they can make the difference between staying in business or shutting our doors for good.
To make matters worse, credit-card giants like Visa and Mastercard control so much of the credit-card market that they are able to set high interchange fees that the banks collect — without pushback, due to a lack of competition. These fees are then passed on to merchants like me, and we have no choice but to pay them if we want to accept credit and debit cards as a form of payment. Given that roughly 30% of all transactions are made with credit cards, rejecting them as a form of payment is not an option for many small businesses.
As a small-business owner, I face competition from big-box retailers and online marketplaces that can often offer lower prices and the convenience of direct shipping. However, I believe my business serves a critical role in my community. I provide a safe and convenient place for people to shop, and I offer products that are tailored to the needs of the people who live in my neighborhood.
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So, what can be done to address the problem of rising swipe fees? A straightforward solution is passing the Credit Card Competition Act, which was introduced in Congress last year. This bill would promote competition in the credit-card industry by providing merchants a second credit card network option to process transactions.
If this bill becomes law, it could help level the playing field for small businesses like mine. By giving us a choice over the credit-card networks we use, we could secure better rates and reduce our swipe fees. This, in turn, would allow us to keep our prices competitive and to invest more in our businesses. As we have seen in other sectors, increased competition results in lower fees and better services like security measures, which is a win-win for businesses and consumers.
Those worried this bill could negatively affect small credit unions and community banks can note that it would only apply to the largest of financial institutions that have over $100 billion in assets.
Communities in Minnesota are still facing inflation that’s far too high, and we need Congress to support common-sense solutions that would have a real impact on lowering prices of the everyday goods we need. Passing the Credit Card Competition Act would be a crucial step in the right direction.
Minnesota’s federal delegation — including Rep. Dean Phillips, whose 3rd Congressional District covers the western suburbs of the Twin Cities; Rep. Pete Stauber, whose 8th Congressional District includes Duluth; and Sens. Amy Klobuchar and Tina Smith — can provide relief to small businesses like mine by making this bill a priority this Congress.
Lonnie McQuirter is director of operations at the 36 Lyn Refuel Station in Minneapolis.
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