Not everyone loses money because of inflation. When a business’ revenue is determined as a percentage of another business’ prices, profit margins automatically increase rapidly without relevance to costs. Such is the reality for a credit card company, whose fees are automatically included in the tab. Unaware of the invisible credit card charge, consumers tend to assume the higher prices are part of the profit margin of the small business with whom they are purchasing products and services.

In every case the small business takes it on the chin, often with little recourse.

Increasingly, small businesses are pushing back by itemizing the cost of credit card processing on the bill for customers paying with credit cards. Business owners report that actually seeing what they are paying to use a credit card often makes the customers angry –at the proprietor and not the necessarily the credit card company.  Fees can range from 2 percent to 4 percent.

Some businesses offer discounts to customers paying cash. And, increasingly, when possible, some businesses are refusing to accept credit cards, but not all businesses can do that.

Service providers who depend on tips also dislike it when their employer choses to itemize credit card fees because they tend to get smaller tips.

It’s a situation that largely exists because there is little competition in the world of credit card companies. Two bills in Congress are aimed at introducing more competition into the industry.

Small business owners often operate on razor-thin profit margins, margins that have been cut further in recent years as credit fees have more than doubled since 2012.

Explains the National Federation of Small Businesses Small (NFIB), businesses do not have the market power to negotiate with large credit card companies on swipe fees, so two identical pieces of legislation have been introduced in the U.S. House of Representatives and the U.S. Senate that would promote freedom of choice and allow small businesses the ability to choose between at least two credit card network options to process transactions.

NFIB has written letters of support and are urging members to also write letters to the House and Senate for H.R. 8874 and S. 4674. “The Credit Card Competition Act of 2022 would inject much-needed competition into the credit card processing market by allowing small businesses the freedom to choose between multiple processing networks,” said Jeff Brabant, NFIB Director of Federal Government Relations. “This legislation injects competition into the credit card processing market and reins in rapidly rising ‘swipe fees’ charged to small businesses that accept credit cards. It will harness the power of competition to give small business owners real choices when it comes to credit card processing networks. This competition will force networks to compete for business the same way that small businesses must compete for customers every day.”

Giving small business owners more credit card network options will force larger credit card companies to compete with each other to lower swipe fees and provide more options for small businesses.

The Wall Street Journal has reported that increasingly businesses are charging fees to process credit cards. Whereas five years ago only about two percent of the eight million US businesses that accept credit cards charged fees for processing credit card payments, that has been increasing, and now stands at about five percent.

The National Retail Federation (NRF) is also backing greater competition in the credit card industry, pointing out that the fees disproportionately impact small retail businesses. “It is small retailers who are calling for swipe fee reform more than any other segment of our industry. They pay the highest swipe fees and have the fewest resources to fight back against global credit card networks and Wall Street banks.”

Earlier this year Visa and Mastercard announced that it is imposing a $1.2 billion dollar increase in swipe fees. According to statistics from the NRF, credit card fees already account for more than $700 a year spent by the average American family.

Visa and Mastercard, which control 80 percent of the U.S. credit card market, centrally price-fix the swipe fees charged by banks that issue their cards even though many legal experts have said the practice violates federal antitrust law. The credit card “giants prevent their credit cards from being processed by competing independent networks, some of which could “do the job more securely and at lower cost,” according to NRF.

Not all of the fee charged goes to the credit card company some of it goes to the issuing bank.

 Visa processes 24,000 transactions a second, which in 2020 generated $21.8 billion in revenues.


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