As the co-owner of a 52-year old Seattle institution and community-oriented bookstore, I know just how important small businesses are to the fabric of our state. But lately, one practice abused by a modern day credit card cartel threatens that role.
As lawmakers in Olympia explore ways to relieve the financial burden on Main Street businesses like ours, reducing sky-high credit card interchange fees is one avenue that could offer meaningful relief. Our representatives in Washington, D.C., also have an opportunity to follow suit by supporting similar reforms at the federal level.
Every time a customer enters our bookstore and taps their credit card to purchase something — be it the latest bestseller or a classroom textbook — we’re charged a “swipe fee” that gets paid directly to the credit card company and the bank.
These transaction costs — which generally amount to between 2% and 4% of the total purchase price — vary depending on the type of card used. Premium credit cards come with higher “swipe fees,” meaning we pay more when a customer uses a top-tier card compared to a starter one.
Put together, these hidden processing fees are costing small businesses a fortune.
How much exactly? Just last year, major credit card companies raked in $148 billion from “swipe fees” — a $12 billion increase from 2023. For many local operations, that’s money that could’ve gone toward expanding inventory, hiring more employees, or simply keeping prices affordable.
And unlike larger retailers that can absorb these fees, small businesses are often unable to eat the cost. At Elliott Bay, we avoid passing these costs onto consumers in the form of credit card surcharges, but we know that others don’t have the same luxury. American families shelled out an additional $1,200 last year thanks to price hikes associated with “swipe fees,” according to the Merchants Payments Coalition.
Consolidation in the credit card market is the driving force behind this broken system. Visa and Mastercard control 80% of the credit cards in circulation, granting them what is effectively cartel-like control over Main Street. And because credit cards are essential for doing business, small businesses are left with no leverage and limited alternatives.
Fortunately, lawmakers in Olympia have already signaled their intent to address this problem. A recently introduced bill — Senate Bill 5070 — would prevent credit card companies from charging “swipe fees” on sales taxes. While it’s not a silver bullet, the legislation would collectively save Main Street operators in the state an estimated $384 million annually, according to data from the Washington Food Industry Association.
Meanwhile, a soon-to-be-reintroduced federal bill called the Credit Card Competition Act would lower “swipe fees” in all 50 states by injecting competition into the payments arena. The legislation would require banks with over $100 billion in assets to include a second processing network beyond Visa or Mastercard on the credit cards they issue.
By leveling the playing field in the credit card sector, smaller networks could offer lower “swipe fee” rates, giving merchants more choice over who should process their transactions. And, Visa and Mastercard would be compelled to lower their “swipe fees” in the process — saving Main Street operators $16 billion each year, the MPC estimates.
It’s no surprise that over four out of five small business owners nationwide support the measure, according to May polling from the Job Creators Network.
Washington state is full of a variety of wonderful local small businesses, each unique to their communities — from local breweries to “third place” bookstores like ours. But we can’t thrive if we’re being drained by hidden credit card fees. It’s time lawmakers in Olympia and Washington, D.C., bring some fairness to the system — and give Main Street a fighting chance.
