Small retailers across Delaware face multiple pressures these days. Inflation is driving up every cost a business encounters while high interest rates make borrowing to cover operations or expansion more expensive. Adding to the list of rising costs is the state’s minimum wage, which increased again this month.
But there’s one growing cost most of our customers don’t know about.
The hidden “swipe” fees card networks like Visa and Mastercard and Wall Street megabanks charge to process credit and debit card transactions have doubled over the past decade and soared 24% in 2021 alone to a record $138 billion nationwide. For most merchants, these fees are their highest operating cost after labor and drive up prices by $900 a year for the average Delaware family, according to the Merchants Payments Coalition.
Averaging over $2 of every $100 spent, U.S. credit card swipe fees are the highest in the industrialized world, and it’s because of lack of competition. With 80% of the market, Visa and Mastercard set the rates charged by banks that issue cards under their brands, and they block other networks that offer lower fees and better security from handling transactions made with those cards.
Fortunately, legislation pending in Congress could begin to fix this broken market. The Credit Card Competition Act would require that credit cards from the nation’s largest banks be able to be routed over at least one competing network in addition to Visa or Mastercard. Banks would choose which networks to enable, but merchants would choose which to use, meaning networks would have to compete over fees, security and service.
Under this carefully crafted bipartisan legislation, U.S. merchants could save $11 billion a year — funds that could be invested in holding down prices for their customers. Consumers would use the same cards, rewards would not be affected, security would improve, and the local community banks and small credit unions that consumers and small businesses rely on would be exempt.
Helping run a second-generation family-owned grocery business, I can attest that the 2% to 3% fee we pay in swipe fees is twice the profit we earn on each sale, the equivalent of a gallon of milk or a dozen eggs for every $200 of groceries.
Grocery is the most competitive industry in the economy, and it’s challenging for independent businesses like ours to compete with global companies that have enormous buying power. To stay competitive, we pass along every cent of savings we can to our customers because if we don’t the next store will. But swipe fees are the one area where a merchant has no ability to negotiate. With few shoppers using cash today, not taking cards isn’t an option.
Banks claim high swipe fees are needed to pay for credit card rewards, but robust rewards are offered in other countries with far lower fees. They also say they cover fraud, but most fraud is eaten by merchants – and we still have to pay swipe fees.
Because credit card fees are a percentage of each transaction, swipe fees go up as prices rise. Visa executives have actually bragged about how inflation has helped increase their profits at a time when many Americans are struggling to feed their families.
Delaware is a small state dominated by small businesses. Sen. Tom Carper and Sen. Chris Coons, would you please cosponsor the Credit Card Competition Act and ensure that global card networks and Wall Street banks have to compete the same as small businesses across Delaware do every day?
Melissa Kenny is executive vice president of Wilmington’s Delaware Supermarkets Inc., also known as Kenny Family ShopRites of Delaware, which operates six ShopRite supermarkets in New Castle County.
— to news.google.com
