Small Dealers Slammed by Credit Card Swipe Fees

Rising rates are highest operating cost after labor, trade group says

By Alan Wolf, YSN

The world’s largest retail trade association is taking Visa and Mastercard to task for “unwarranted increases” in credit card swipe fees that are inordinately hurting small businesses.

The National Retail Federation (NRF), along with a group of independent retailers, provided written testimony to the Senate Judiciary Committee, which held a hearing today on excessive swipe fees. The hearing follows a $1.2 billion fee increase imposed last month by the two credit card companies.

In a letter to committee members, NRF chief administrative officer and general counsel Stephanie Martz said swipe fees for Visa and Mastercard credit cards average 2.22 percent of a transaction, but can be far higher for small merchants because they are based in part on transaction volume. Small retailers with a few dozen transactions a day pay a higher rate than national chains with millions of transactions.

Fees are also higher for e-commerce transactions, which have become increasingly important to small retailers because of the shift to online shopping since the beginning of the pandemic, she explained.

“Ongoing and unwarranted increases in swipe fees are especially damaging to small retailers,” Martz wrote. “We have heard many stories from small retailers about the extreme challenges posed by the current payments system” and Visa and Mastercard’s 80-percent control of the U.S. credit card market.

But regardless of a merchant’s size, the fees are the highest operating cost for most retailers after labor, and contribute to soaring inflation. As Patti Riordan, owner of Smoke Stack Hobby Shop in Lancaster, Ohio, wrote, “The fact that swipe fees are a percentage of the transaction amount is particularly punitive to our business when we sell higher priced items and especially during these inflationary times. The amount we pay in credit card fees is higher than any operational cost we have other than payroll and rent.”

BrandSource has helped members contend with high credit card fees by partnering with Heartland Payment Systems, which provides retailers with flat and transparent processing rates. “Most store owners don’t understand how the processing piece works,” Gavin McKinnis, a Heartland division manager, told YSN in a 2020 interview. “Some contracts allow processors to raise their fees every six months.” The company also provides retailers with comprehensive data on all dues and assessment fees imposed by leading card brands like Visa, MasterCard, American Express and Discover Network.

See: Heartland Tackles Pain Points of Credit Card Processing

For its part, the Judiciary Committee, led by Senators Dick Durbin and Chuck Grassley, is asking Visa and Mastercard to withdraw last month’s fee increase, which they said would “undoubtedly increase the already high costs consumers are facing and add to inflationary pressure.”