Small Business Advocacy The domination of Visa and Mastercard means high costs of doing (local) business.

Many small business owners across the country cite that particular expense as their highest only after payroll. Some pay more in credit card fees than they make in annual profit.

In the United States, the average credit card swipe fee that every business must pay to run a credit card is between 2-3%, which is 7 times the amount that European businesses pay. What’s more, these fees continue to rise faster than inflation - in 2022, merchants paid a combined $160.7 billion in swipe fees, which is 16.7% higher than what they paid in 2021. These higher costs are in part passed on to consumers; it is estimated that swipe fees increase the cost of goods by $1000 for the average American family every year.

Currently, there aren’t any other options with lower fees, and since Visa and Mastercard control 85% of credit and debit card transactions in the United States, businesses have no choice but to work with them. Plainly stated, the market lacks competition and so Visa and Mastercard – essentially a duopoly - can set their price. Although corporate behemoths like Amazon and Walmart can negotiate lower rates, for the individual independent businesses that line our Main Streets and downtowns, they are non-negotiable. However, the actual cost of the service to the card issuers is estimated at just $0.05 per transaction. So, after collecting the transaction fee on $1.67 of any given transaction, they are making pure profit.

Members of Congress have responded to the impacts of this obvious price gouging on the economy by introducing bipartisan-backed legislation, the Credit Card Competition Act, aimed at lowering small business expenses by requiring credit card issuers and banks with more than $100 billion in assets (like JP Morgan Chase, Wells Fargo, Bank of America and Citibank) to offer at least two credit card network choices and requiring one of those processors to be outside of Visa and Mastercard. The intention of the bill would be to open up more competition to smaller processing operators, leading to better service and lower fees. Some estimates calculate the savings from implementing this policy at $15 billion dollars, which could then be reinvested into businesses and local economies, creating additional economic activity and jobs.

While some advocates would also like to see stronger protections, such as fee caps like those already in place on debit cards, these efforts in Washington are welcome news to local business owners. However, they will take time so in the meantime, for consumers looking to support local businesses cash - or at the very least a debit card - is still king.