Inside the Credit Card Competition Act of 2022

The United States needs its small businesses. Totaling a stunning 31.7 million, small businesses are the source of 99.9 percent of all business based in the U.S. They are responsible for 44 percent of our country’s economic activity. They are the very lifeblood of our country. So, it might be surprising to hear that credit card “swipe fees” are costing our small businesses so much money—enough to cripple them, in some circumstances. Last year, a piece of legislation was introduced that would bring competition into the marketplace, thus reducing swipe fee costs for these small businesses. Here are the key details you need to know about this act and how it might have a significant impact on your very own business.

What are Swipe Fees, and What’s the Problem?

A swipe fee is a charge that major credit card companies require businesses to pay for every transaction completed. Swipe fees can reach up to 3.5 percent of every Visa, Mastercard, American Express, or Discover purchases. At present, small businesses are operating on such small profit margins that swipe fees can cause seriously consequential chaos for their very survival. This is a huge problem, especially seeing that swipe fees are now the second-highest operating cost for companies, right after labor. It becomes more of a problem when we consider that 1. These fee increases are ultimately passed on to the consumer, and 2. Swipe fees will continue to increase if competition isn’t present in the marketplace. According to The Hill, “Big banks charge swipe fees set by the major credit card companies. Through this process, companies like Visa and Mastercard have struck exclusivity deals to ensure merchants have no choice but to use their networks to route transactions.” So, congress stepped in…

What is the Credit Card Competition Act?

Introduced in the U.S. House and Senate in 2022, the Credit Card Competition Act “allows small businesses the ability to choose between at least two credit card network options to process transactions. This legislation injects competition into the credit card processing market and reins in rapidly rising ‘swipe fees’ charged to small businesses that accept credit cards.” Swipe fees are particularly troubling for small businesses. Sometimes, they are the difference between a business being able to accept credit card payments and not being able to—and “cash only” is a particularly hard payment strategy when consumers are not likely to have cash on hand at any given moment. If passed, the Credit Card Competition Act (CCCA) would let small businesses choose which payment network offers the best bang for their buck. Credit card networks would have to compete for business in a similar way that small businesses compete for customers. If small businesses have more options to choose from, credit card companies will need to compete to offer lower swipe fees and more advantages to those small businesses in need of a network.

If you’re interested in this matter, head over to the National Federation of Independent Business and tell congress your thoughts.

Looking to fund your next initiative? A line of credit, like those offered from ARF Financial, could be your best shot at making big moves. Our BANKROLL line of credit can put up to $1,000,000 at your fingertips. You’ll be able to use the funds as needed and pay only for what you borrow. Plus, our approval process happens in just 24-48 hours! Visit us today to learn more about how ARF Financial can help fund your business goals.