Video: What Are Swipe Fees and Why Do Small Businesses Hate Them?
Did you know that every time a customer swipes, inserts, or taps a credit card to make a purchase, the store pays a fee to the credit card company and bank? It’s true—they’re called “swipe fees.” And these charges add up, especially for small businesses that operate on razor thin budget margins.
Paying a modest fee in exchange for a service is a basic building block of our free market economy. But over the years, the two largest credit card companies—Visa and Mastercard—and the banks have formed a cartel-like monopoly. As a result, they’re able to bully store owners and charge whatever they want.
In 2022, they collected nearly $130 billion in fees, up 20 percent from the year before. Alarmingly, swipe fees in the U.S. are seven-times higher than Europe.
For small businesses, that means budgets are tightening at a time when they are already being crushed by inflation. And at the same time, the average family ends up paying $1,000 more per year to help cover the extra costs.
Federal legislation has been introduced that would save businesses and consumers an estimated $15 billion a year. The bill is called the Credit Card Competition Act. And as the name suggests, it would inject competition into the credit card market—driving down “swipe fee” levels in the process.
Throughout history, U.S. policymakers have acted to encourage free market competition to foster a healthy economy. Now, they need to do the same to rein in runaway credit card costs that are holding small businesses hostage. Tell Congress today to pass the Credit Card Competition Act!