Header image by Blake Wisz on Unsplash
In a recent poll, over 80 percent of those surveyed felt affordability over the last year has not improved. It’s a sentiment many campaigns have seized on to galvanize voters, but with time before the midterms, there’s still so much lawmakers could do to bring down costs. One of which is passing the Credit Card Competition Act (CCCA) to reduce swipe fees, an expense that is costing Coloradans over $2 billion every year. At the State Capitol this year, there are efforts to make a small dent in this, but we really need Congress to act.
While swipe fees are usually hidden from the consumer, they’ve become an enormous expense for business owners who get charged every time someone pays with a credit card. Since 2010, swipe fees paid in the United States have quadrupled and have been a particularly burdensome multiplier of inflation. That’s because these fees are charged as a percentage of the total transaction amount, meaning when costs rise, so do swipe fees. Creating a cycle of ever-rising prices as merchants attempt to keep up with growing expenses.
For everyday Americans, the average family now spends over $1,800 a year on swipe fee-related price increases. The problem has simply become too large for business owners to hide. Many have been forced to either raise prices, add a separate surcharge, or close up shop for good. Main Street has long been the backbone of Colorado’s economy and a place of community for those who live in the state, but Wall Street’s desire to pad already enormous profit margins put these stores at risk.
The primary culprits for these skyhigh swipe fees are Visa and Mastercard, amassing more than 80 percent of the market share and boasting profit margins above 50 and 45 percent, respectively. For a business owner like myself, I can only dream of profit margins that great, but for this duopoly, it’s by design. They’ve leveraged their control over the industry to sideline any meaningful competition and continue raising swipe fees.
While their networks are carried on numerous cards across several banks, these major banks don’t negotiate fees down because doing so would mean competing against each other for lower rates and less profit for themselves. The current system more closely resembles a cartel-style price-fixing scheme than it does a competitive capitalist industry in which fair pricing and improving services are paramount.
That’s precisely the problem the CCCA was introduced to fix, offering more freedom to merchants and creating real competition in the credit card industry to drive down exorbitant swipe fees. To do this, the bill would allow businesses to choose from at least two different networks when processing a credit card transaction. This simple change would motivate major card companies like Visa and Mastercard to drop their fees to a reasonable rate and improve their services. Just like any other competitive industry, this duopoly would have to earn their customers as opposed to rigging the game to be the only option.
The benefits for Colorado cannot be understated. The CCCA is estimated to save the state over $340 million every year, allowing businesses to grow wages, expand benefits, and lower prices for consumers. It’s no wonder the majority of Americans, a bipartisan group of lawmakers and some of the country’s largest unions, support this bill.
Come November, there’s no doubt Americans will still be concerned with the affordability crisis. And while they’ve likely made up their mind on who’s to blame, they are carefully watching who’s fighting to fix the problem and reduce their costs. The CCCA is a great first step, and I hope our Sens. Michael Bennet and John Hickenlooper along with our entire congressional delegation will lend their support to getting it passed.
Anthony Bulfin is a Colorado-based 35-year restaurant veteran and has owned and operated restaurants and bars in both Breckenridge and New York.
