Credit Card Competition Act Stands up for Consumers - Steve Marocco
Friday, March 22, 2024
With prices slow to come down, it’s great to see Sen. Jack Reed (D-RI) taking action to alleviate the financial strain on Main Street by cosponsoring the Credit Card Competition Act (CCCA). This bill would take a massive step towards reducing excessive credit card swipe fees that have only exacerbated the financial woes of inflation and become many merchants’ second-highest operating expense after labor.
Rhode Island merchants pay over $260 million a year in credit card swipe fees, pulling vital revenue out of our communities and into Wall Street's deep pockets. Every time a customer shops with a credit card, the business incurs a swipe fee, eating away at their budget and forcing prices higher, ultimately contributing to a damaging cycle of inflated prices for our local economy.
The average American household pays more than $1,000 annually as a result of these added costs. Even worse, is the negative impact on underbanked individuals who often pay with cash. These consumers sometimes don’t have a bank account, let alone a credit card, yet they’re forced to pay the higher prices induced by those earning lavish rewards by paying with premium credit cards. It’s estimated that this system transfers over $3.5 billion annually from individuals making less than $75,000 a year, to those making more than $75,000.
GET THE LATEST BREAKING NEWS HERE -- SIGN UP FOR GOLOCAL FREE DAILY EBLASTSuch inequity in the payments industry is no doubt deeply felt by everyday Rhode Islanders, particularly when grocery shopping. Grocery stores have notoriously low profit margins, and their prices grew 25 percent over the last four years, outpacing general inflation. On average, these stores operate with a slim 1 to 3 percent profit margin, meaning even the slightest increase in swipe fees can perpetuate the cycle of inflation.
In Rhode Island, heightened costs are reflected in ongoing food insecurity challenges. Just last year, the number of Rhode Islanders in need of some form of food assistance jumped nearly 30 percent from the year prior. Swipe fees make even the bare necessities more expensive, and with so many families in need, it’s imperative that our lawmakers tackle this challenge from every angle.
Fortunately, Sen. Reed is willing to stand up for Main Street and offer merchants a choice when processing credit card transactions. By passing the CCCA, business owners could finally choose between two different routing networks, breaking the Visa Mastercard duopoly that has dominated the credit card industry. Their market control has allowed them to tamp down competitors and raise swipe fees on a consistent basis, despite technology for processing transactions becoming cheaper and more convenient.
Alternative networks, like the ones currently operating in the debit card space, have eight times less fraud than Visa and Mastercard and would help drive down fees if they could enter the credit card market. Competition has been a powerful market force in just about every other industry, and it’s time to unleash it on the credit card space to protect merchants and lower costs for consumers.
Major unions like the International Brotherhood of Teamsters and the Service Employees International Union have also recognized the CCCA’s potential cost-saving benefits with their recent endorsement. Teamster President Sean O’Brien described the union's support by saying they believe the CCCA will, “ease inflationary pressures on working people and establish greater accountability in the financial market.”
With momentum building, Sen. Reed’s decision to cosponsor the CCCA is a positive step for Rhode Island’s economy, and I hope his colleagues will join him in supporting its passage. Rhode Island businesses and consumers need relief from high prices, and easing the strain from excessive credit card swipe fees is a great place to start.
Steve Marocco is the owner of Elmwood Sports in Cranston
