Credit Card Fees Swamping Small Businesses

Small businesses have many challenges just keeping their lights on and their doors open.  Ever-increasing credit card transaction fees are not helping matters.  These transaction fees paid by retailers are known as “interchange fees,” and the Wisconsin Restaurant Association is asking Congress to curb these out-of-control fees.

In 2009, President Obama signed into law the Credit Card Accountability, Responsibility and Disclosure Act, or CARD Act.  The law was meant to correct the bad behavior of credit card companies.  Rather than react responsibly and begin actions to comply with the new law, the industry has instead moved quickly to raise rates, increase fees and reduce available credit before the law goes into effect next year.

Visa and MasterCard together control 80 percent of the payment card market, and wield so much power that retailers have little choice but to sign their contracts and accept their fee increases – which have continued despite the crippling economic recession.

Recent studies of credit card companies’ strategies have found exorbitant interest rate hikes and new fees for consumers, higher interchange fees on small businesses and misleading marketing to teens and economically disadvantaged groups.  Studies also show accelerating profits for these multi-national giants in spite of shrinking consumer spending.

Unfortunately, the CARD Act did not address interchange fees; Congress cannot consider its work on financial regulatory reform complete until harmful interchange fees are brought under control.  In 2008, transaction fees in America topped $48 billion, up 300 percent since 2001.  While Visa and MasterCard charge retailers about 2 percent on every transaction in the U.S., they charge less than 1 percent in many European countries and only 0.5 percent in Australia.

Congress should finish its work on financial regulatory reform by taking action to lower interchange fees – protecting small businesses and consumers alike from the monopolistic power wielded by major credit card companies.