Business
A proposal is moving through the Kansas Legislature that would ban credit card networks from applying fees to sales taxes and tips.
If passed, the measure would unlock immediate savings for the state’s dynamic small business community. Lawmakers in Topeka have a golden opportunity to side with Main Street and get the bill onto the floor for a vote.
Many consumers are unaware that when they tap, insert, or swipe their credit card at grocery stores like ours, the business is on the hook to pay a fee to the credit card company and bank.
Called a “swipe fee,” this hidden tax generally amounts to between 2% and 4% of the purchase amount. Although that may seem modest when applied to a $3 candy bar, it adds up when you are talking about hundreds of thousands of transactions each week.
Swipe fees were first introduced to offset the cost of making a transaction with a credit card.
But over time, credit card companies and banks have learned how to game the system and swipe fees have gone off the rails while the cost of processing a transaction has actually declined.
To put a number to it, retailers like our company collectively forked over $148 billion in credit card swipe fees last year. And that’s a roughly $12 billion increase compared to 2023.
Because swipe fees are a percentage of the total transaction amount, inflation pushes the dollar amount of these fees higher — without any additional costs to credit card giants.
Consolidation within the payments arena is largely to blame for this situation.
Visa and Mastercard control 80% of the credit cards on the market, which gives them the power to hold small businesses hostage and raise these fees with minimal pushback.
And unlike the big banks that can take a financial hit, Main Street businesses don’t have the financial buffers to absorb these costs.
This means many business owners are forced to pass some of these added costs down to customers.
For retail grocery stores like ours, that often means a little higher price tag for items. It’s estimated that the average American family forks over an additional $1,200 every year thanks to rampant swipe fees.
In almost all areas of the economy, healthy competition drives innovation and progress.
I can confidently say this is the case for retail grocers like us, which fight tooth and nail to gain a sliver of the market share. Yet, Visa and Mastercard continue to operate as a duopoly in the payments sector with minimal oversight.
Thankfully, lawmakers across the country have begun to catch on.
Eliminating swipe fees on taxes and tips in Kansas is a step in the right direction. Other states that are considering adopting similar proposals—such as Arizona or Colorado—say the change could save businesses upwards of $200 million a year.