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At a time when lawmakers struggle with common ground and common sense, recently introduced federal legislation is a breath of fresh air. The Credit Card Competition Act — which enjoys bipartisan support in both chambers of Congress — seeks to address the ballooning fees small businesses pay every time a customer uses a credit card.
Ohio Sen. JD Vance is helping lead the charge for this much-needed reform that will benefit Ohio’s Main Streets. His colleagues need to hop on board.
As the owner of an air inspection company in Akron, I have firsthand experience with the financial squeeze these “swipe fees” have on budgets — especially for small businesses that operate on razor-thin margins. And I’m not alone. In a national survey of small business owners, around 2 in 5 called these fees “a significant challenge” for their financial well-being.
Amid a sluggish economy that has been plagued by inflation for roughly two years, the last thing entrepreneurs need is a hidden transaction tax.
In general, credit card companies and banks rake in between 2% and 4% of every transaction in fees — an expense that has more than doubled over the past decade and continues to rise. While these charges may seem like just pennies to some, the fees add up quickly. In 2022 alone, credit card companies and banks collected roughly $160 billion in swipe fees from businesses.
That’s more than the entire gross domestic product — which is the value of all goods and services produced in a year — of a country like Hungary.
Ohio’s nearly 1 million small businesses aren’t the only ones that feel the financial pinch from credit card swipe fees. Consumers end up paying the price as well. Entrepreneurs often have no other choice but to pass along a portion of the extra costs to customers in the form of higher prices. One estimate suggests the average family pays an extra $1,024 in inflated price tags each year because of swipe fees.
The skyrocketing transaction taxes paid by businesses are largely a result of a lack of competition. Visa and Mastercard control roughly 80% of the credit card market — a duopoly position that allows the corporate tag team to raise swipe fee rates without fear of backlash.
In nearly every other area of the U.S. economy, free market competition keeps costs under control. It’s why Wendy’s doesn’t quadruple the price of a hamburger; company executives understand customers have other options to choose from, including McDonald’s or Dairy Queen.
As introduced, the Credit Card Competition Act would disrupt this broken system by fostering free market competition. The legislation would require banks with more than $100 billion in assets to include additional credit card networks on the cards it issues to consumers. That way, small business owners like me will have additional options on how to process transactions.
The benefits for entrepreneurs are expected to be extensive. One analysis estimates that businesses will enjoy yearly financial savings upward of $15 billion. That’s money Main Street businesses in Ohio can use to grow operations, attract a larger customer base, invest back into the community, and provide employees with the pay they deserve.
In virtually every other industry, free market competition helps to keep prices in check and foster a healthy economy. I’m thankful to lawmakers like Sen. JD Vance for pursuing legislation that would inject a dose of competition into the credit card market. Ohio small businesses and families will all benefit.
Chapin is a small business owner in Akron and a partner of the Job Creators Network Foundation.
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