Reforming Credit Card Swipe Fees Is an Urgent Matter

Credit card swipe fees are quietly draining the pockets of small business owners. These fees, charged every time a customer pays with a card, reached a staggering $187.2 billion in 2024, according to the Merchants Payments Coalition (MPC). For business owners already grappling with skyrocketing operating expenses, supply chain disruptions, and a looming recession, these fees have become less of an unavoidable nuisance and more of a breaking point.

With swipe fees now ranked as the second-highest operating cost for retailers after payroll, it’s clear they contribute to inflation, reduced profits, and, ultimately, business bankruptcies. Small business owners must pay attention to this issue, as reforming these fees could mean the difference between staying afloat or shutting down.

This post dives into why swipe fees are out of control, how they impact small businesses, and why reform is more critical now than ever.

What Are Swipe Fees?

Swipe fees, or interchange fees, are the charges credit card companies apply every time a customer makes a purchase using their card. These fees typically range between 2% and 4% of the total transaction amount, including sales tax. While this might sound like a small percentage, it quickly adds up.

Visa and Mastercard control 80% of the U.S. credit card market and dominate swipe fee revenue. They alone racked up $111.2 billion in swipe fees in 2024, a 10% increase from the prior year. Despite improvements in transaction technology that have lowered processing costs, these companies continue to push fees higher, creating what some critics call a “duopoly” that exploits small business owners.

How Swipe Fees Impact Small Businesses

These fees profoundly impact small business owners, forcing them to make difficult choices that often ripple through their prices, customers, and communities.

1. Higher Operating Costs

Swipe fees topped $172 billion for U.S. businesses in 2023 and $187.2 billion in 2024. That year, swipe fees became the highest operating cost after payroll for many retailers, drastically cutting into already thin profit margins. For small business owners struggling with rent, supplier increases, and employee wages, this added cost becomes nearly unsustainable.

Unfortunately, the issue gets worse in times of inflation. Since swipe fees are a percentage of the transaction amount, they rise as the price of goods increases. This unavoidable fee multiplier makes doing business increasingly costly as prices climb.

2. Rising Prices for Customers

To account for escalating swipe fees, many small businesses are left with only two options: either absorb the additional cost or pass it on to customers. Most businesses cannot afford to take major hits to their profit margins, so the price hike falls on their customers. Industry estimates show this inflates costs for the average household by more than $1,100 per year.

This price increase disproportionately affects lower-income customers, particularly those who rely on cash or debit cards and don’t benefit from the high-reward perks that premium credit cards offer.

3. Lost Investments in Growth

High credit card fees also siphon funds away from investments that could benefit small businesses and their communities. Rather than reinvesting earnings into hiring, infrastructure upgrades, or new product lines, many businesses find themselves allocating an increasing slice of the pie to credit card companies.

Christine Pollack, a representative of the MPC, stated, “These fees siphon off money that could be used to hold down prices or invest in local communities.” It’s a point that hits home for many independent retailers trying to thrive in today’s challenging economy.

The Bigger Picture

It’s not just business owners who feel the sting of these fees. Transportation tolls, tips, and even sales taxes are subject to swipe fees, meaning that local governments, nonprofits, and customers end up indirectly contributing to Visa and Mastercard’s record profits. For example, Michigan’s Mackinac Bridge Authority paid more than $342,000 in swipe fees in 2024 alone—which could have been reinvested in infrastructure or maintenance if not for these costs.

This lack of competition in the card market, combined with Visa’s and Mastercard’s dominance, inflates these fees year-over-year without any indication of relief for businesses or consumers.

Why Swipe Fee Reform Matters

1. Balancing the Power Dynamic

The U.S. now has the highest swipe fees in the industrialized world. Unlike many other nations, there is little regulation to limit these fees or promote competition among card networks. The bipartisan Credit Card Competition Act is one promising piece of legislation aiming to introduce alternative routing options for transactions, which is expected to save U.S. merchants and consumers $16 billion annually.

2. Giving Small Businesses Room to Thrive

By reforming swipe fees, small businesses can regain some of the profit squandered on these charges. This is money that could go toward growing their businesses, keeping prices competitive, and creating jobs in local communities.

3. Curbing Inflationary Pressures

Reducing swipe fees doesn’t just help business owners; it also lessens the inflationary burden on consumers. Lower fees mean less markup passed along to shoppers, helping combat price inflation at a critical time.

4. Encouraging Transparency

Addressing swipe fee legislation can also push for greater transparency about what these fees actually cost businesses and consumers, holding the credit card giants accountable.

What Small Business Owners Can Do

It’s clear that swipe fees are no longer a background cost of doing business; they are actively threatening the sustainability of small businesses across the country. Here are actionable steps business owners can take today to address the burden of swipe fees:

Review your Cost Structure

Start by understanding how much you pay in swipe fees each month. Speak with your payment processor to explore alternative options or negotiate better rates where possible.

Advocate for Swipe Fee Reform

Join advocacy groups like the NRF or MPC to push for legislative reform. Many of these organizations provide resources to help small business owners get involved in promoting fair policies.

Educate Your Customers

Transparency is key. Inform your customers about how swipe fees impact your business and the prices they pay. Some businesses disclose these fees directly or offer cash discounts to encourage alternative payment methods.

Monitor Legislation

Stay updated on proposed reforms like the Credit Card Competition Act. Reach out to local lawmakers to express support for measures that promote competition and reduce fees.

The Time for Swipe Fee Reform Is Now

Credit card swipe fees have reached record highs, and small business owners can no longer shoulder the weight alone. With the stakes including skyrocketing operating costs and rising prices for consumers, there is an urgent need for meaningful reform.

By addressing this issue, small businesses can reclaim the resources they need to grow, hire more workers, and stimulate local economies. At ARF Financial, we are committed to supporting small business owners grappling with these challenges. Together, we can call for change and create a fairer system for all.