Rising credit card transaction costs are putting a strain on small businesses, even as inflation cools and the labor market eases. The shift towards digital payments, fueled by consumer preference for credit and debit cards, is increasing expenses for merchants.
Many small businesses are breathing a bit easier as inflation has cooled and the race for workers slows. But consumers’ steady embrace of credit cards is taking a growing bite out of their margins.
Gene-Christian Baca, the owner of Walter’s Hot Dogs in Marmaroneck and White Plains, New York, estimated that he now pays about $50,000 a year in costs associated with processing credit card transactions, a sum he says has ballooned with rising card processing rates and more customers paying with cards over cash. “Every year, 3% of all of our sales is washed away just to credit card processing,” he said. Merchants have long shouldered these “swipe fees,” the catchall term for businesses’ payments to banks and card companies each time customers swipe. While a federal rule caps debit card swipe fees at 21 cents per transaction, those for credit cards can be much higher. And as many shoppers ditched cash for plastic cards or mobile payment apps, businesses have seen credit card transactions swell. They made up 32% of all U.S. consumer payments in 2023, up from 24% in 2019, according to a Federal Reserve study. Cash shrunk its share to 16% over the same period, down from 26%. Spending on American Express, Discover, Mastercard and Visa cards in the U.S. soared to $5.25 trillion in the first half of 2024, up from around $4.98 trillion during the same period in 2023, according to data provided to NBC News by the Nilson Report, which covers the payments industry. These shifts in customer habits have added to many businesses’ costs. Merchants paid an average of 2.26% in swipe fees for transactions using the Visa and Mastercard credit card networks in 2023, the latest year with available data, according to Nilson. The two companies accounted for more than $100 billion of the $172 billion in total U.S. swipe fees in 2023, Nilson said, and Visa accounted for 52% of credit card spending on the four major card networks. Some of Visa’s fees are now going up
Credit Card Fees Small Businesses Consumer Spending Inflation Payment Processing
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