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Commentary: Congress should stop small businesses from getting choked by credit card 'swipe fees'

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By Jennifer Armstrong
Monday, June 28, 2010

Last week in conference committee, House leaders reached a deal with Senate leaders on a provision of the financial reform measure that would limit the amount credit card companies charge retailers every time a customer pays with debit cards. The "swipe-fee" provision would give struggling small businesses a much-needed break, and it's essential that this common-sense fix become law.

These fees have skyrocketed in recent years -- particularly for debit cards -- making it very difficult for a small restaurant like mine to stay profitable as the big banks and credit card companies take big bites from our bottom lines. Every time a customer swipes a card -- be it for a big catering job or a quick lunch -- I pay the credit card companies and banks fees for accepting the card as payment. These fees used to be a reasonable cost of doing business, and made sense for the convenience of electronic payments.

But in the past few years, the credit card industry has ratcheted up these fees. Last year my business paid more than $10,000 in swipe fees. As a percentage of my sales, the fees have risen to 1.3 percent last year from 0.8 percent in 2006.

The problem is credit card companies have different fees for each credit and debit card. Unfortunately, I only find out how much I'm charged when I receive my monthly credit card statement -- well after these transactions are processed. How can I account for these costs when I don't know what I'm charged until days or sometimes weeks afterward? This is not just the case for me but for businesses across the country.

Moreover, small retailers routinely pay higher fees than our larger counterparts. We're not going to get as good a deal as large retailers because we don't bring in as many sales.

Reform will provide competition and give the Federal Reserve the power to keep these fees from strangling business owners. The provision has survived a conference vote, and now it's critical that our elected officials support the final package and send it to President Obama's desk.

As a small-business owner, I'm not normally a fan of "big government" getting involved in the private sector. But there are times when we need the government to be a watchdog against Wall Street. The giant increases we've absorbed have kept us from expanding our business, hiring workers and offering better service to our customers -- yet they've come with no discernible change in service or products offered from the credit card industry.

These fees are raised because there is no competition, and nothing to keep the credit card industry from fleecing small employers with higher fees that are largely hidden from the public. And with no power to negotiate or control these fees like we can other costs, we're at the mercy of Wall Street -- and we need Congress to act.

Swipe-fee reform will be good for small business, good for consumers and good for our economy as Main Street employers spend less on bank fees and more on growing our businesses and creating jobs. Reform will mean an opportunity for my business to grow, and give me the opportunity to provide better value to my customers.

I hope Congress and the president will take the final steps needed to pass this historic reform. We're so close to getting the help we need -- reform that will put money back in the pockets of Main Street instead of letting Wall Street siphon it off one swipe at a time.

Jennifer Armstrong owns Heavenly Chicken & Ribs in Dunkirk, Md.


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