nbcnews.com
Soaring Credit Card Fees Squeeze Small Businesses
Small businesses face rising credit card swipe fees, costing an estimated $172 billion in 2023 and impacting profitability; consumers increasingly prefer credit cards over cash, driving up costs for merchants, who are exploring strategies like convenience fees to mitigate losses; the Credit Card Competition Act, aiming to boost competition and lower fees, remains stalled.
- How are rising credit card swipe fees impacting small businesses' profitability and what are the direct consequences?
- Rising credit card usage is significantly impacting small businesses' profitability. Gene-Christian Baca of Walter's Hot Dogs estimates $50,000 in annual credit card processing fees, representing 3% of sales. This reflects a broader trend: credit cards comprised 32% of U.S. consumer payments in 2023, up from 24% in 2019.
- What factors contribute to the increasing use of credit cards by consumers, and how are these trends affecting the overall payments landscape?
- The increase in credit card transactions, driven by consumer preference, is escalating swipe fees for merchants. Visa and Mastercard controlled over $100 billion of the $172 billion in total U.S. swipe fees in 2023, with Visa's recent fee increases adding an estimated $100 million annually. This cost is often passed onto consumers through higher prices.
- What are the potential long-term implications of the ongoing dispute over swipe fees, considering the stalled Credit Card Competition Act and the diverse strategies employed by businesses?
- The ongoing struggle over swipe fees highlights a systemic issue impacting small businesses' financial stability. While some businesses absorb these costs, others, like Patz Deli, implement convenience fees. The stalled Credit Card Competition Act underscores the deep-seated conflict between merchants and credit card companies, with potentially long-term consequences for both businesses and consumers.
Cognitive Concepts
Framing Bias
The article frames the issue primarily from the perspective of struggling small businesses, emphasizing the financial burden of swipe fees. The headline and introductory paragraphs immediately highlight the negative impact on these businesses. While the views of credit card companies are presented, the framing leans heavily towards portraying swipe fees as an unfair burden on small businesses.
Language Bias
The article uses language that generally portrays swipe fees negatively, such as "washed away," "ballooned," and "excessive." While these terms accurately reflect the concerns of small business owners, they lack complete neutrality. More neutral alternatives could include phrases such as "increased costs," "significant expense," and "subject of debate." The repeated use of the term "swipe fees" also contributes to a negative connotation, but an alternative phrasing doesn't readily present itself.
Bias by Omission
The article focuses heavily on the perspective of small business owners and their struggles with swipe fees, but it could benefit from including the perspectives of credit card companies and banks. While Visa's statement is included, a more in-depth exploration of their justifications for fee increases and the overall economic factors influencing swipe fees would provide a more balanced view. The article also omits discussion of potential solutions outside of increased competition, such as technological innovations that could lower processing costs.
False Dichotomy
The article presents a somewhat simplified dichotomy between small business owners struggling with swipe fees and credit card companies/banks profiting from them. It doesn't fully explore the complexities of the payment processing system, such as the roles of banks and payment processors, or the potential benefits of credit card usage for both businesses and consumers (e.g., fraud protection, consumer rewards).
Sustainable Development Goals
The article highlights how increasing credit card swipe fees disproportionately affect small businesses, reducing their profits and potentially hindering their growth. This directly impacts their ability to create jobs and contribute to economic growth. The rising costs force some businesses to increase prices, potentially impacting consumer spending and overall economic activity.