6 reasons small businesses are fed up with swipe fees

Small businesses pay the highest rates and have the least leverage to fight back
Sr. Director, Grassroots
April 20, 2023

Small businesses are fed up with the broken and unfair U.S. credit card market and the way it favors big Wall Street banks and card networks over Main Street retailers. These businesses are particularly vulnerable to high credit card swipe fees because they pay the highest rates and have the least leverage to fight back.

Two credit card companies control 80% of the market, setting the fees charged by all banks that issue their cards along with the terms of usage — forcing merchants to foot the bill. In fact, credit card swipe fees continue to rise year after year, more than doubling over the past decade and soaring 20% last year alone.

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That’s why NRF is asking Congress to pass the Credit Card Competition Act, a bill that would infuse competition into the U.S. payments market by requiring that at least two competing processing networks be enabled on each credit card. This reform has the potential to save American businesses and consumers an estimated $11 billion per year.

We asked six small business owners who are fed up with swipe fees how these fees affect their businesses and customers.

Fed up with paying for credit card rewards programs

Stephen Wangel, owner of The Kitchen Loft in Lynbrook, N.Y., is fed up with banks funding their credit card rewards programs using profits from the swipe fees he’s forced to pay every time a customer uses a credit card.

“The largest part of our fee is paying for the rewards programs that the credit card companies offer. This can amount to 1 to 1.5% of the overall picture but can be as high as 3.5%,” Wangel says. With the average sale at his high-end kitchen design store between $14,000 and $18,000, swipe fees can amount to hundreds of dollars per purchase and “are something that is always top of my mind.”

Fed up with lack of competition

The lack of competition and inability to negotiate terms of usage in the credit card market is frustrating for Neil Abramson, owner of Cutie Patutie’s, a children’s consignment store in Leominster, Mass. Abramson says swipe fees are one of his business’s top five expenses and the only part of his business he cannot negotiate.

“We can’t choose a better option,” he says. “We only have Visa and Mastercard to go through, which control over 80% of the credit card processing market.” Abramson says competition is what makes America work and “Visa and Mastercard shouldn’t be the only ones that get to process credit cards.”

Fed up with lack of innovation

“Small businesses need competition in the credit card processing market because it forces innovation,” says Jennifer Luna, CEO of The Kindship, a retail company in Tacoma, Wash., that operates local gift shops, toy stores and baby boutiques. She’s fed up with the lack of innovation in the credit card processing market, which undermines security and stifles new technology.

Currently, the United States has 34% of all credit card fraud in the world despite having only 22% of the world’s transaction volume. That’s because the two companies that dominate the market have blocked competitors that offer lower fees and security innovations from processing transactions made on their cards.

“As a small business owner, I have to compete with all the other shops in town and that forces us all to be better business owners, community members, and to stay on top of trends in technology,” she says. “Without competition, credit card companies can take the easy road, collect all their money, and they’re not forced to innovate.”

Fed up with higher swipe fees for small businesses

Take action

Tell Congress to support the Credit Card Competition Act.

“Small businesses end up spending huge amounts of money on credit card swipe fees,” says Tina Miller, owner of Walkabout Outfitter in Virginia. Miller says small businesses are hardest hit by high swipe fees and lack of market competition because fees are determined by a merchant’s sales volume. That means small businesses pay the highest swipe fee rates because of their small volume.

“It’s really hard for small businesses since we pay a much higher percentage on swipe fees than larger corporations,” she says. Increased competition would “hopefully reduce the price of those swipes because companies would try to compete and hopefully reduce prices.”

Fed up with high costs that prevent growth

“My shop has been open since November of 2019 and it has been a roller coaster these last few years just trying to keep my doors open,” says Margaret Hansen, owner of Off Main Gift Shop in Manasquan, N.J. For Hansen, high credit card swipe fees eat into her bottom line and prevent her from making investments to grow and stay in business.

“I pay an average of 3%, which is about $5,000 a year,” she said. “$5,000 would go a long way in my business. I could bring in equipment to better service my customers. I could hire a part-time employee. I could even pay a couple months’ rent.”

Fed up with not having disposable income for community investments

Julie Wurr says she would make more community investments if she didn’t have to grapple with excessive swipe fees and other high costs of doing business. Her florist shop, Heart n’ Home in Laurens, Iowa, has been a mainstay in the community for over 20 years and giving back is important to her. She is fed up with not being able to be as charitable as she would like because swipe fees leave her with razor-thin profit margins.

“I want to make a donation to our local community swimming pool fund,” Wurr says. “But instead, I have to take that out of my own pocket.”

NRF will continue to advocate for passage of the Credit Card Competition Act and stand up against excessive swipe fees that stifle growth and hurt small businesses. Learn more about how small businesses are banding together at NRF.com/FedUpWithFees.

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