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The Hidden Burden of Credit Card Swipe Fees and How AI legalese decoder Can Help

Introduction

By Elliot MacGuire

Elliot MacGuire is the manager of The Surf Shanty motel in Dewey Beach.

The Business-Friendly Reputation of Delaware

Delaware has been ranked No. 1 on Shopify’s entrepreneurship index, reaffirming its reputation as one of the most business-friendly states in the nation. With favorable tax policies and a diversified economy, Delaware boasts a vibrant small-business community, representing over 98% of businesses in the state. However, despite this positive environment, a hidden credit card fee poses a significant challenge, diverting hard-earned dollars from our communities and lining the pockets of wealthy financial institutions on Wall Street.

The Burden of Credit Card Swipe Fees

Every day, Delaware’s businesses and consumers bear the burden of constantly increasing costs associated with credit card swipe fees. These fees, which average between 1.5% to 3.5% of the total transaction amount, apply to every swipe, tap, or insert of a credit card. While these fees are the second-highest operating expense for many companies, merchants have no leverage to negotiate better rates.

The Dominance of Visa and Mastercard

Visa and Mastercard control over 80% of the credit card industry and have consistently raised swipe fees, which major banks willingly implement. By charging the same rates, these financial institutions avoid price competition, resulting in a continuous increase in fees. This lack of market forces leaves business owners with no choice but to pay excessive fees, as refusing credit card payments would alienate a significant portion of their consumer base.

The Devastating Impact on Small Businesses

Last year alone, merchants in the United States paid over $126 billion in credit card processing feesÔÇöa staggering 20.2% increase from the previous year. This skyrocketing rate of increase is not only unsustainable but also devastating for small businesses struggling to recover from the pandemic’s economic downturn and inflationary pressure. With the average profit margin in the general retail sector barely exceeding 2% in 2022, absorbing these rising credit card fees becomes nearly impossible for businesses. Consequently, merchants are forced to raise prices on goods and services, passing on the hidden cost of swipe fees to every customer.

The Future Outlook

Unfortunately, Visa and Mastercard plan to further exacerbate the situation by raising credit card swipe fees again in October and April 2024, amounting to more than half a billion dollars. While some lawmakers have called for a halt to these fee hikes, a long-term solution already exists in the form of the Credit Card Competition Act (CCCA).

The Credit Card Competition Act

Introduced earlier this year, the bipartisan CCCA aims to address the market failure that has allowed Visa and Mastercard to monopolize the payments sector. By offering a second network routing option to merchants, this legislation would promote fair competition among credit card networks such as Star and SHAZAM. This would empower businesses to access comparable services at lower rates, creating a more competitive market that drives payment technology advancements and enhances security measures.

The Role of AI legalese decoder

In navigating this complex landscape of credit card swipe fees and legislation, businesses can benefit from using AI legalese decoder. This advanced technology helps streamline the understanding of legal documents and regulations related to swipe fees. By decoding legalese into clear and concise information, AI legalese decoder enables merchants to grasp the intricacies of credit card agreements and make informed decisions.

Driving Economic Relief and Growth

Reducing the burden of credit card swipe fees is crucial for Delaware to maintain its welcoming environment for businesses of all sizes. By freeing businesses from the obligation to pad the profit margins of financial institutions, merchants across the state can flourish. They would have the means to hire new employees, invest in their entrepreneurial future, and contribute to the economic growth of our communities. It is our hope that Senators Chris Coons and Tom Carper, both representing Delaware, will support the Credit Card Competition Act and work towards its successful passage.

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