COHEN: Texans Can’t Afford Visa and Mastercard Raising Swipe Fees

Editor’s Note: a guest post by Chad Cohen, Chairman of the Dallas Young Republicans.

Families across Texas are struggling. As a byproduct of the pandemic, food insecurity among Texans nearly doubled from December 2018 (about 13%) to June 2021 (22%), and our state has the highest projected number of people living in food‐insecure households in 2021. Gas prices are up nearly 30% from this time last year, making it more expensive to pick up the kids from school and drive to work. And a normal trip to the grocery store to pick up staple items like meat, poultry, fish, and eggs will result in spending 13% more on these products. Meanwhile, almost 28% of Texas households were unable to pay their energy bill at least once over the past year, the highest in the country.

The reality is over half of Texans are living paycheck-to-paycheck, and rising inflation will only increase this figure. While Texans are having difficulty making ends meet, the credit card industry is making an influx of money at the expense of struggling Americans.

When you use a credit card to make a purchase, banks and card networks, mainly Visa and Mastercard, charge retailers a hidden “swipe fee” to process the transaction. When time you buy groceries, put gas in your car, or buy household productswith a credit card, an additional charge is added on to each transaction. For credit cards, the fees average about 2% of the total transaction but can be as high as 4% for some credit cards that have cash back rewards or travel points.

Though that cost is not transparent to consumers, merchants must pay these fees on every credit card transaction, which is becoming increasingly frequent as consumers transition away from cash. With the rising prices of goods, and these fees being a percentage based on the transaction total, the credit card industry is raking in record profits off of inflationary prices that are forcing Texans across the state to make difficult choices.

In order to cover this increased cost, merchants – who operate on tight profit margins – have no choice but to pass these costs onto their customers or risk going under. Swipe fees are many businesses’ second-highest operating cost after labor, showing just how much an increase in these fees will negatively impact businesses across the state.

Visa and Mastercard set swipe fee schedules that are followed by virtually all banks that issue their cards due to a lack of competition in the payments marketplace. Last year, while we were still in the midst of the global pandemic, Visa and Mastercard quietly raised card swipe rates in April 2021, which are expected to cost merchants $1.17 billion per year. And the rest of those increases just hit the market.

Thankfully, a few brave members of Congress recently sent a letter to the heads of Visa and Mastercard urging them to hold off on their planned swipe fee hike, noting that this will fall on American businesses owners and hard-working American families. Thankfully, Rep. Beth Van Duyne is taking a leading role in opposing these fees, and I hope her and her colleagues’ efforts will prevent this swipe fee increase, which would raise the cost of everything.

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