Georgia lawmakers are working to lower costs for local businesses by taking aim at excessive fees that are charged to merchants on every credit card transaction. The fees, known as swipe fees, have increased exponentially over the last several years, forcing merchants to raise prices on goods and services to ensure they can keep their doors open.
This is why several states, including ours, have introduced legislation to eliminate swipe fees on sales and excise taxes, which includes the state’s motor fuel tax. By passing this bill, state lawmakers will effectively lower the price at the pump and reduce the overall cost of goods and services throughout our state. As we work to make ends meet amid increased costs, this reduction in additional fees will provide families across the state with much-needed breathing room.
While state lawmakers consider this bill, it’s critical that U.S. Sens. John Ossoff and Raphael Warnock take on this issue at the federal level and support the Credit Card Competition Act (CCCA) to tackle rising credit card swipe fees across the country.
Last year, merchants paid over $160 billion in card fees, a more than 16 percent increase from the year prior. Meanwhile, the average household cost of swipe fees for American families has now eclipsed $1,000 a year as Visa’s net profit margin continues to soar over 50 percent while Mastercard hovers near 45 percent.
Major credit card companies and big banks continue to rake in record profits thanks in part to swipe fees that average about 1.5 to 3.5 percent of every credit card transaction. Visa and Mastercard use their market dominance to block their competitors and continue consolidating control. When issuing their credit cards, banks implement the swipe fee rates set by the credit card giants and offer the single routing option provided by Visa or Mastercard.
This means merchants have no ability to seek out cheaper ways of processing transactions because the fees have already been fixed by the same financial institutions profiting off of them.
And as credit cards continue to grow as a primary payment option for Americans, main street businesses have little room to reject this form of payment.
By passing the CCCA, business owners would finally have an additional processing network option when accepting credit card transactions. The CCCA ensures that a second routing network is available to merchants, offering them a choice and bringing market competition back to the payments sector.
As a result, de facto exclusivity deals would finally become a thing of the past. Smaller networks like SHAZAM or Pulse could break into the market and process credit card transactions with reduced swipe fees. This, in turn, would force Visa and Mastercard to either lower fees or prove their worth with enhanced services. Competition, a market force that has always helped the American economy thrive, would assist in correcting a longtime failure of our payments system.
The CCCA even takes steps to ensure local banks and community credit unions are not affected by this legislation. Unless a financial institution has more than $100 billion in assets, it will remain untouched by the policy changes outlined in the bill.
In these challenging times, it’s more important than ever to ease the burden on hardworking Georgians. It’s time for Sens. Ossoff and Warnock, who sit on the Senate Banking Committee, to work with their colleagues to pass the CCCA and provide financial relief to businesses and consumers in the Peach State.
Kimberlyn Carter is the executive director of Represent GA Action Network Inc., a 501c4 created to support the state’s progressive civic engagement agenda.