Credit card swipe fees take a chunk out of my SC small business. Congress can help.

Posted By: Toni Reale Advocacy Updates, Awareness, Community, General News,

The below opinion piece by Lowcountry Local First member, Toni Reale, ran in The State APRIL 07, 2024: 

As the proud owner of Roadside Blooms, a North Charleston boutique, I’ve seen how small businesses breathe life into local communities and foster economic opportunity. Sen. Lindsey Graham will soon have an opportunity to help boost Main Street further and drive economic growth.

Small businesses like mine are plagued by sky-high “swipe fees” that we are forced to pay every time a customer uses a credit card. 

The financial headache is largely because roughly 80% of the credit card industry is controlled by just two companies: Visa and Mastercard. To help address the duopoly, the Senate Judiciary Committee, of which Graham is a ranking member, is discussing legislation that would foster competition within the payments arena and lower prices.

That’s why I’m hopeful that Graham and South Carolina’s other elected leaders in Washington will be supportive.

“Swipe fees,” which snatch 2 to 4% of every transaction made with a credit card, have become a Godzilla-like financial expense for businesses like mine. In fact, this transaction tax is the second highest budget line item behind labor costs. Nationally, U.S. merchants paid an estimated $93 billion in Visa and Mastercard credit card fees in 2022, according to Nilson Report — up from $26 billion in 2010.

Even more alarming, Visa and Mastercard show no signs of slowing down. Because they have no real competition and therefore small businesses have scant other credit card processing choices, the corporate tag team is free to jack up rates without fear of backlash. At a time when small enterprises are still recovering from the effects of historic inflation, these increases are not just burdensome, they’re crippling.

For a small business, every dollar paid in swipe fees is money that would have supported other areas of the business. My small business, for example, paid nearly $30,000 in swipe fees last year, which could have supported a new part-time employee to help us grow.

Amid this challenging landscape, the legislation being considered in the Senate — called the Credit Card Competition Act of 2023 — would be a game-changer for small businesses. The bill would require big banks with more than $100 billion in assets to provide businesses more options on how to process credit cards. That would force Visa and Mastercard to compete against additional networks, which in turn would lower “swipe fees.” More competition equals lower prices.

If implemented, it’s estimated the legislation could save businesses across South Carolina — and the country — upwards of $15 billion annually. It’s significant financial relief that would percolate throughout local communities rather than being shipped to the headquarters of Visa and Mastercard in California and New York. That translates to more economic opportunity right here in the Palmetto State.

Despite what opponents suggest, the new landscape won’t upend credit card rewards programs that consumers (notably tourists) have come to enjoy. An analysis from CMS Payments Intelligence (CMPSI) finds “rewards margins are high enough to withstand competition.”

I urge all South Carolina elected officials in Washington to recognize the importance of this legislation and take decisive action in support of it. South Carolina can secure a more fair and competitive market that benefits all — especially the hardworking men and women who are the backbone of our state’s economy. 

Toni Reale is the owner of Roadside Blooms in North Charleston, SC.