Bolster Delaware's small businesses by passing the Credit Card Competition Act

Shopify ranked Delaware No. 1 on its latest entrepreneurship index, which aligns with our state’s widespread reputation for being one of the most business-friendly states in the nation. With favorable tax policies and a diversified economy, it’s no wonder Delaware has a vibrant small business community, making up over 98% of businesses in the state. However, thanks to a hidden credit card fee, a portion of Delawareans' hard-earned dollars are being siphoned from our communities and funneled into the hands of some of the wealthiest financial institutions on Wall Street.

Every day, Delaware’s business community and, ultimately, consumers are burdened with the perpetually growing costs associated with credit card swipe fees. No swipe, tap or insert of a credit card is exempt from the exorbitant swipe fees that take an average of 1.5% to 3.5% off the top of every total transaction amount.

Despite these fees being the second-highest operating expense for many companies, merchants have no leverage to negotiate better rates. 

Visa and Mastercard dominate over 80% of the credit card industry and have continually raised swipe fees on a schedule that major banks willingly implement. The banks all agree to charge exactly the same swipe fee rates, whatever Visa and Mastercard set. That way, they don’t compete on price, and there are no market forces to keep the fees in check. That’s why the fees just keep going up.

As a result, business owners have no other option but to pay excessive swipe fees, considering their only other choice is to forfeit credit card payments altogether and risk alienating a huge base of consumers. 

This impossible decision is how merchants ended up paying more than $126 billion in credit card processing fees last year, jumping an astounding 20.2% from the year prior. This rate of increase is not just unsustainable, but also devastating for small businesses struggling to recover from a pandemic-driven downturn and inflationary pressures that cut profit margins razor thin.  

The average profit margin in the general retail sector barely eclipsed 2% in 2022, making it nearly impossible for businesses to absorb these increasing credit card fees. Because of this, merchants have to raise prices on all their goods and services, introducing every customer to the hidden cost of swipe fees. Whether they use a credit card or not, and whether they know these fees exist or not, the average American household is paying more than $1,000 a year in higher prices as a result.

Meanwhile, Visa and Mastercard are planning to make matters worse by raising credit card swipe fees again in October and April by more than half a billion dollars. 

While many lawmakers have called upon the credit card duopoly to stop such a fee hike, this situation only proves the need for a long-term fix that already exists in the form of the Credit Card Competition Act. 

Introduced earlier in the year, this bipartisan bill would fix the market failure that has allowed Visa and Mastercard to box out their competitors by amassing a dominating presence and unfair control over the payments sector. By offering a second network routing option to merchants, the CCCA would allow for fair competition for credit card networks like Star and SHAZAM, which could finally offer businesses comparable services for lower rates. 

With a competitive market, credit card companies would motivate each other to advance payment technology and enhance security measures that would better serve customers and protect their finances.

If Delaware wants to remain a welcoming place for companies, small and large, we must reduce the burden of credit card swipe fees that pull funds out of our communities and limit our economic growth. Businesses across the state could more easily hire new employees and invest in their entrepreneurial future if they weren’t forced to pad the profit margins of massive financial institutions. I hope Sens. Chris Coons and Tom Carper will support the CCCA and work to pass this legislation, which will increase competition to help drive down credit card swipe fees, providing economic relief to both businesses and consumers.