6 June 2024
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Mike Cyr is the owner of Bradley’s 24 Hour Citgo and Car Wash in Presque Isle.
Like many small-business owners in Maine, I have struggled with the high swipe fees that banks charge to process credit card transactions. These fees not only eat into our already thin profit margins but also place an undue burden on our customers. As we head toward peak tourism season, it’s high time that Congress stands up for small businesses and consumers by supporting the Credit Card Competition Act, which will apply pressure from fair market competition to lower these fees.
Maine’s summer tourism industry is a cornerstone of our state’s economy. The natural beauty of our coastline, forests and quaint towns draw millions of visitors each year. In 2022 alone, Maine welcomed more than 15 million tourists, contributing approximately $6.5 billion to the state’s economy. Tourism supports more than 110,000 jobs in Maine, underscoring its critical role in sustaining local communities and businesses.
However, the impact of swipe fees on Maine’s economy, particularly its tourism sector, cannot be understated. Swipe fees cost merchants and their customers a staggering $172 billion nationwide in 2023, according to the Nilson Report. These fees have more than doubled over the past decade, becoming the second-highest operating cost after labor for many businesses, the report said. For Maine’s small businesses, which are heavily reliant on the influx of out-of-state dollars during the tourist season, these fees amount to nearly $340 million every year getting sucked out of Maine’s local economy and sent to Wall Street giants.
The impact of rising swipe fees goes beyond the small-business community. For the average family, swipe fees add more than $1,100 a year to the cost of goods and services. This is money that could be better spent enjoying the local attractions, dining at our restaurants, or staying at our inns and bed-and-breakfasts. Instead, it is diverted to already profitable banks and credit card companies.
Small businesses in Maine operate on razor-thin margins, especially in the tourism sector, where competition is fierce and the season is short. Every cent that goes to swipe fees is a cent that could have been passed on to customers through lower prices.
The current rates are especially not justifiable when considering that the average cost for banks to process a transaction has fallen. In fact, for debit transactions processing costs have dropped by nearly 50 percent, from 7.7 cents in 2009 to just 3.9 cents in 2021. Yet, the rates have not been adjusted accordingly, because banks apparently would rather accept the swipe fee rates set by credit card companies than attempt to compete on fee rates with other banks. Major banks cede control of fee rates to Visa and Mastercard who control a whopping 80 percent of the market and consistently raise fees, despite record profit margins and lower costs to process transactions. This price structure allows banks and credit card behemoths to reap unjustified profits at our expense.
The Credit Card Competition Act is a critical step toward addressing these issues. By fostering competition and reducing excessive swipe fees, this legislation would provide much-needed relief to small businesses and consumers alike. Instead of being stuck with accepting a Visa or Mastercard service, merchants would finally have a choice between at least two different networks when routing a transaction. This could instill much-needed competition that could ultimately motivate the major credit card companies to keep their fee rates reasonable and improve their services in order to stay competitive with alternative networks. It would also help merchants save revenue that can be passed on to customers, hold down inflationary price increases and allow small businesses to thrive.
As a small-business owner deeply embedded in Maine’s tourism industry, I urge U.S. Sens. Susan Collins and Angus King to support this bill. I believe this legislation represents a fair and necessary reform that would promote economic growth and provide tangible benefits to Maine’s Main Street businesses and consumers. Let’s put an end to the excessive swipe fees and ensure that our state’s vibrant tourism industry can continue to prosper.