Small Business Owner Fights Against Soaring Credit Card Fees
Danny Reynolds, the owner of Stephenson’s of Elkhart, a clothing store in Elkhart, Indiana, has been burdened by exorbitant credit card fees that are hindering his ability to hire more employees. He laments the fact that swipe fees in the US are significantly higher compared to other countries, averaging 2.24% of the total transaction and peaking at 4% for premium cards.
Last year, merchants paid an estimated $93 billion in Visa and Mastercard fees, a drastic increase from $33 billion in 2012. This surge in fees poses a major setback for Reynolds and other retailers, as the fees are controlled by Visa and Mastercard, who dominate 83% of the US credit card market.
Visa and Mastercard pocket the network charges, while the interchange fees go to the card-issuing banks. Disturbingly, these fees are expected to increase even further next month. Reynolds asserts that these fees are inhibiting his ability to hire individuals from his community, and he recalls how credit card purchases skyrocketed from 50% to over 90% of his store’s transactions over the past three decades.
The negative impact of these soaring swipe fees extends beyond retailers to consumers. The National Retail Federation reports that these fees cost the average American household $1,000 annually in increased prices. Doug Kantor from the Merchants Payments Coalition explains that these fees worsen inflation, forcing merchants to raise prices and resulting in consumers bearing the burden.
Victor Garcia, who owns two ice-cream stores in Texas, goes to the extent of urging customers to think twice before using their credit cards, as they cost him over $25,000 last year. Kantor adds that credit card fees are the second highest operating cost for mainstream merchants, trailing only labor costs.
The impact of rewards cards is particularly detrimental, as the swipe fees are even higher for these transactions. This means that lower-income customers are essentially subsidizing the rewards and deals enjoyed by wealthier cardholders. Reynolds emphasizes that this system perpetuates existing disparities, transferring $15 billion annually from low-income to high-income individuals and widening socioeconomic gaps.
In an effort to combat the dominance of Visa and Mastercard, lawmakers are pushing for the Credit Card Competition Act, which would allow other networks to process transactions. This would introduce competition into the market and potentially lower fees. Reynolds and other small business owners joined senators and the Merchants Payments Coalition in a press conference to advocate for this legislation, urging Congress to break up the monopoly of credit card networks.
The credit card networks argue that this move would jeopardize their ability to provide rewards to customers. However, Reynolds asserts that all he wants is a fair and competitive playing field. With an open market, he believes that small businesses can thrive and consumers can benefit from lower fees.
Denial of responsibility! Vigour Times is an automatic aggregator of Global media. In each content, the hyperlink to the primary source is specified. All trademarks belong to their rightful owners, and all materials to their authors. For any complaint, please reach us at – [email protected]. We will take necessary action within 24 hours.
