In last week’s op-ed, “Swipe fees are plaguing Maine’s businesses and consumers,” proponents of the Credit Card Competition Act claim the costs associated with these fees have become a runaway expense for struggling small businesses. The commentary did not tell the whole story, however, potentially misleading readers into believing credit card providers are reaping financial rewards at Main Street’s expense. That is simply not true.
Businesses are paying more interchange fees, also known as swipe fees, than they used to because the volume of card transactions has nearly tripled since 2009. While the percentage of non-cash payments was growing before COVID-19, the pandemic accelerated that trend. Today’s consumers rely on their credit cards to pay for everyday transactions and build credit.
The Credit Card Competition Act’s supporters claim their proposal will lower fees for small businesses by increasing competition. But there is no evidence that the bill will achieve this goal.
Credit unions provide credit cards as a valued service to their members. They do not offer this benefit because they are making money off the interchange fees. In fact, Federal Reserve data highlights the negative impact these fees have on a credit card program’s profitability. For credit unions, credit card costs are an average of $0.23 higher per transaction than the interchange revenue. Despite this, Maine credit unions continue to provide this safe and reliable service, to help increase access to credit for all who want it.
Merchants know there are costs associated with taking any form of payment – including cash. The average cost of accepting cash can be as high as 9.1% of the transaction. That is three times more than typical interchange fees. But because interchange fees are collected after a transaction occurs, it can feel as if the big credit card providers are squeezing local merchants for extra money. In fact, it is simply part of the overall cost of keeping the entire payments system safe.
The proposed regulation has not had a formal congressional hearing, which is cause for additional concern. This has not stopped the proponents of the Credit Card Competition Act from advocating for this legislation in the court of public opinion through op-eds and misleading figures. Lawmakers should explore all the potential ramifications before enacting such sweeping policy changes. The legislation may be bipartisan, but its opponents are bipartisan, too.
Maine’s credit unions are dedicated to advancing the opportunities and financial well-being of our members. We carry out our People Helping People mission by improving access to credit. We want to make it easier for consumers and merchants to thrive. Both are members of credit unions, and integral to the communities we serve and Maine’s economy.
We recognize budgets are tight. But the Credit Card Competition Act is not the solution that small businesses are looking for.
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