Guest Commentary | Swipe fee sting: How credit card costs hurt businesses
Every time you swipe a credit card at a local business, a portion of that sale vanishes — not into the pockets of the hardworking shop owner, but into the hands of credit card companies and banks. These hidden “swipe fees” may seem small on an individual transaction, but they add up fast, cutting into already thin margins and forcing tough decisions on pricing, staffing and growth.
Unlike big-box retailers that negotiate lower transaction fees, independent businesses — the neighborhood cafe boutique, or family-owned restaurant — are stuck paying some of the highest rates. In fact, U.S. merchants shoulder some of the steepest credit card processing fees in the world. According to the National Retail Federation, swipe fees in the United States now total over $160 billion annually — a cost that ultimately gets passed on to consumers.
Swipe fees, also known as interchange fees, are charges imposed on businesses every time a customer pays with a credit card. These fees, which typically range from 2% to 4% per transaction, may not sound like much at first. But consider this: if a small restaurant generates $1 million in annual sales and 90% of those transactions are paid by credit card, the business could be paying anywhere from $18,000 to $36,000 per year just in swipe fees before a business even covers food costs, wages, or rent.
The problem is that these fees are largely non-negotiable for small businesses. Visa and Mastercard, which control about 80% of the U.S. credit card market, set the rates, leaving merchants with little choice but to accept the terms or risk losing customers who prefer cashless transactions. Meanwhile, larger retailers with more bargaining power can negotiate lower fees, creating an uneven playing field.
According to the Merchants Payments Coalition, swipe fees are often the second or third highest cost for small businesses, right behind payroll and rent. And unlike other business expenses that can be managed or reduced through cost-cutting measures, these fees are a fixed, unavoidable cost.
While these fees may seem like a merchant problem, they affect everyone. Businesses facing high processing costs must make up for the expense somehow — often by raising prices on goods and services. That means consumers, whether they pay with a credit card or not, end up footing the bill.
Some businesses have started adding credit card surcharges to offset costs. A growing number of restaurants, for example, now add 3% to 4% fees for credit card transactions or offer discounts for cash payments.
While this helps business owners recover some of their losses, it can frustrate customers who are used to the convenience of plastic and are unaware of the hidden costs associated with their purchases.
What’s Being Done to Fix the Problem?
Congress has introduced The Credit Card Competition Act, bipartisan legislation aimed at increasing competition among credit card processors by allowing merchants to choose from multiple payment networks. The law could help drive down fees, much like how debit card transaction costs dropped after similar reforms in 2010.
Consumers can support local businesses by paying with cash or with debit cards, which have significantly lower processing fees than credit cards.
Be understanding about surcharges. If a local business adds a small fee for credit card purchases, know that it’s likely a necessary move to stay afloat — not an attempt to nickel-and-dime customers.
Small businesses are the backbone of our community.
It’s time we recognize the burden of swipe fees and push for fairer policies that allow them to thrive.
Travis Prince, a restaurant industry veteran, is the regional sales manager for Forbes-Snyder South in Fort Myers.
To reach TRAVIS PRINCE, please email news@breezenewspapers.com