Small Businesses From Harlem To Hollywood Are Struggling To Pay Credit Card Swipe Fees

February 19, 2022

Amazon and Visa reached a truce on credit card swipe fees this week, an issue that had the two industry leaders at odds in the U.K. through most of 2021.

If the service fees are an issue for a major player like Amazon, imagine what they are for small businesses that may still be struggling from the effects of the COVID-19 pandemic.

At Giovani’s restaurant in suburban Richmond, Va., a sign implores customers to pay in cash, claiming that swipe fees are greater than the restaurant’s rent during many months.

Louis Hoch, president and CEO of payment solutions firm Usio, Inc., says the problem for small businesses can be traced to the pandemic, which he says changed how consumers make their purchases.

“Consumers preferred using cards for payments than handling cash that they perceived might carry the infection,” Hoch told ConsumerAffairs. “Overall, the merchants experienced higher card usage for payment of their services and, as a result, their processing volume increased which also increased their payment processing expense.”

Fee increase in April

But the worst may be yet to come for small businesses that accept credit cards. Cindy Smith, head of Payments at payment network Veem, said the credit card processors postponed an increase in swipe fees that would have gone into effect last year. Those increases take effect in April.

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Unless consumers begin making more cash purchases, small businesses will face higher costs. But Smith believes the shift to electronic payments is deeply embedded.

“I think long-lasting changes that altered the way people pay and get paid will continue to stick around long after COVID,” she told Consumer Affairs.

Consumers could pick up the bill

Caught between credit card swipe fees and rising inflation, some small businesses may feel stuck. If they raise prices, they risk losing customers. So some are rewarding customers who pay in cash.

Others, according to Money magazine, are asking their customers to pay their swipe fees by tacking on a service charge on credit card purchases. These fees typically range from 1.5% to 3.5%.

While some consumers may start making more trips to the ATM to take advantage of cash discounts, Kelsey Sheehy, small business specialist at NerdWallet, doesn’t see that as a trend, especially since so many transactions are now completed online.

In-person payments…plunged during the pandemic, falling from 91% to 34% between October 2019 and April 2020…

“In-person payments…plunged during the pandemic, falling from 91% to 34% between October 2019 and April 2020,” Sheehy said. “While face-to-face transactions have rebounded to some degree, shoppers are still reaching for their credit cards and smartphones over cash.”

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