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COMMENTARY

The cost of doing business shouldn’t include unfair credit card swipe fees

Over the past decade, swipe fees have more than doubled, jumping nearly 17 percent last year and costing businesses $160.7 billion nationwide

The Credit Card Competition Act of 2023 would require that credit card-issuing banks with over $100 billion in assets offer a choice of at least two networks over which an electronic credit transaction can be processed.Daniel Acker/Bloomberg

With more than 3,000 eating and drinking locations across 1,200 square miles, there is no shortage of options for Rhode Islanders to enjoy a meal out with friends and family. As players in Rhode Island’s restaurant and hospitality space for 22 years, we embrace market competition. It drives us to innovate, hire the best people, and keep our prices reasonable to attract customers.

If only the big banks that process our credit card transactions had the same kind of competition. Every day we are at the mercy of exorbitant and unfair credit card swipe fees because the top two credit networks control more than 80 percent of the credit card market. Because of this they can essentially ban alternative routing networks and charge whatever fee they want, as evidenced by their recent announcement increasing swipe fees by $502 million over the next eight months.

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On average, we are paying around 3 percent for every credit card transaction we process, that’s up from a little over 2 percent pre-pandemic. It may not sound like much, but when you consider that most customers today pay by plastic, swipe fees are easily among our top business costs, right after food and labor costs. And when you work in an industry that averages 3- to 5-percent profit margins, even these incremental increases in swipe fees can put you out of business.

Over the past decade, swipe fees have more than doubled, jumping nearly 17 percent last year alone, costing businesses a record $160.7 billion nationwide. Families are being impacted by this too, as incremental charges add up to an extra $1,000 per year for the average household.

Fortunately, Congress has recognized the problems created by the duopoly Visa and MasterCard hold on the credit card transaction market. A broad, bipartisan group of legislators has introduced the Credit Card Competition Act of 2023, which would enhance competition and choice in the credit card network market. Building off debit card reforms enacted by Congress in 2010, the bill would require that giant credit card-issuing banks with over $100 billion in assets offer a choice of at least two networks over which an electronic credit transaction can be processed.

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This isn’t an industry protectionist bill. We aren’t seeking a handout, we just want reasonable market competition, the same principle that has kept our industry vibrant for so long. Restaurants have seen a lot of ups and downs over the last several decades, from recessions to the pandemic. You learn to pivot and adapt to the unexpected. Swipe fees are an inevitable cost of doing business. But they have gone from being a necessary evil to being a wrecking ball on our bottom line. It is unreasonable and unfair, but it can be fixed.

We urge our US Senators Sheldon Whitehouse and Jack Reed to support the Credit Card Competition Act.

Colin Geoffroy is president of G Hospitality, a hospitality management and development company operating in Rhode Island and Massachusetts. Sam Glynn is the owner and operator for Chomp Kitchen & Drinks in Warren and Providence.