Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
American business owners have long been frustrated by the exorbitant costs associated with accepting credit cards. The complaints regarding these “swipe fees” have only become more pronounced since the outbreak of the pandemic. Consequently, more consumers have abandoned cash in favor of card or contactless payment methods.
According to figures from the Federal Reserve, credit card purchase volumes have skyrocketed by 51% between 2015 and 2021. Transaction values have also experienced a 60% surge over the same period.
Last year, US merchants paid a record $160.70bn in processing fees to accept $10.6tn in card payments, according to the Nilson Report. Approximately 79% of those fees were from credit cards.
As profit margins shrink due to rising inflation, many businesses are seeking ways to pass on higher costs to their customers. They are implementing surcharges or convenience fees for those who choose to pay with credit cards.
According to payment consultancy TSG, 5-10% of the 8 million small businesses in the US that accept cards now charge fees for credit card usage. This is a significant increase from 2% five years ago. TSG further highlights that approximately 15% of new card-accepting merchants have adopted a surcharge policy.
Business owners often find themselves with little choice. According to the National Retail Federation, credit card fees, which typically range from 2-4% of the transaction amount, represent the highest operating cost for most merchants after labor. Surcharges are implemented to cover the interchange fees that businesses would otherwise incur from card networks and banks.
Naturally, there is a risk involved as consumers can choose to pay with cash or take their business elsewhere. The concept of going cashless may seem modern and efficient, but it comes with a price.
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.
