Credit card swipe fees are eating into small businesses’ profits as consumers ditch cash for plastic. With increased fees and mounting costs, businesses like Walter’s Hot Dogs are calling for customers to consider paying with cash. The battle over swipe fees continues to heat up as legislation struggles to gain traction.
Credit Card Swipe Fees: Small Business’s Growing Worry
Small businesses have enjoyed some relief from inflation and worker shortages, but the growing reliance on credit card payments is pinching margins. Gene-Christian Baca, owner of Walter’s Hot Dogs, claims that his credit card processing fees have ballooned to $50,000 annually. That's 3% of his total sales swallowed up by swipe fees. As more consumers embrace plastic over cash, businesses are feeling the sting of these fees, which vary by card network but can cut deeply into profits. Credit card swipe fees, often passed on to consumers, are fast becoming a major concern for the mom-and-pop shops that fuel local economies.
Cash is King… or Is It?
As credit card use rises, the battle between plastic and cash is intensifying. Last year, credit card transactions accounted for a whopping 32% of U.S. payments, up from 24% in 2019. Meanwhile, cash is on the decline, shrinking to just 16% of consumer payments. With swipe fees for networks like Visa and Mastercard averaging 2.26%, small businesses are footing the bill for this trend. To combat the increasing costs, some businesses, like Walter’s Hot Dogs, are hiking prices, while others, like Patz Deli, are tacking on a “convenience fee” for card payments. The swiping seems endless—unless we go back to the basics: cash.
Visa’s Rising Fees Spark Backlash
Visa’s latest increase in swipe fees, implemented on January 1, has caused an uproar, and critics argue it’s consumers who will ultimately feel the burn. The Merchants Payments Coalition estimates the new fees will cost $100 million annually, a small number on its own but with large-scale consequences for businesses and customers alike. With the total swipe fees hitting a record $172 billion in 2023, small businesses, already operating on razor-thin margins, are increasingly frustrated. This fee hike comes amid heated debate over transparency and competition within the credit card industry. Critics say it's only a matter of time before customers see the added costs at checkout.
Legislation on the Horizon? Not Quite Yet
In response to growing concerns, legislation like the Credit Card Competition Act aims to shake up the swipe fee system by increasing competition among payment processors. The bipartisan bill, championed by Senators Durbin and Marshall, is designed to help merchants by lowering swipe fees. But despite its promises, the bill has stalled in Congress, with lobbying groups for credit card companies and banks pushing back. The dispute over swipe fees, which has raged for years, shows no sign of ending soon. As long as credit card swipe fees keep rising, the fight over who shoulders the burden will continue to divide merchants and lawmakers alike.
