"It’s sometimes better for me to give the postcard away rather than pay exorbitant swipe fees extracted by Wall Street banks and global credit card networks."
In this July 1, 2021, file photo, a customer uses the contactless payment chip in this VISA card to purchase gasoline at a gas station in Ridgeland, Mississippi. Credit: Rogelio V. Solis / AP

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Tom Largay is the owner of Old Port Card Works in Portland.

Tourists visiting scenic Maine love to send home postcards. But when they pull out a credit card to pay, it’s sometimes better for me to give the postcard away rather than pay exorbitant fees extracted by Wall Street banks and global credit card networks.

Most consumers don’t know it, but Visa, Mastercard and the banks that issue their cards charge merchants a “swipe” fee averaging 2 percent to 3 percent of the purchase price — plus a flat fee around 10 cents per transaction — whenever a consumer uses a credit card.

These fees don’t sound like much, but they add up quickly and can wipe out my razor-thin profit on the small-ticket purchases that make up many of my sales. It’s cheaper to be out the cost of a postcard than to be out the cost and have to send banks that fee.

I ask for cash when purchases are small, but today’s consumers rarely carry actual money, especially since COVID-19. The Federal Reserve says fewer than 20 percent of payments are cash, and at my store it’s only 10 percent. Customers sometimes use the digital wallet on their phone, but mobile transactions have even higher swipe fees and only cost me more.

Nationwide, credit and debit card swipe fees soared 25 percent last year alone to a record $138 billion and have more than doubled over the past decade. Swipe fees are most merchants’ highest cost after labor — far too high to absorb — and drive up prices by $900 a year for the average family, according to the Merchants Payments Coalition.

This year, Visa and Mastercard hiked swipe fees another $1.2 billion despite being warned by Congress that doing so would “add to inflationary pressure.”

Fortunately, things could be about to change.

This summer, a bipartisan group of lawmakers, including U.S. Rep. Peter Welch of Vermont, introduced the Credit Card Competition Act in Congress. Swipe fees have risen so high because of lack of competition, but this legislation — as its name implies — would finally bring competition to the way transactions are routed for processing.

Currently, Visa and Mastercard — which control 80 percent of the market — centrally price-fix the swipe fees charged by all banks that issue their cards rather than the banks competing to give merchants the best deal. And they block transactions from being processed over other networks that offer lower fees and better security.

Under the legislation, the nation’s largest banks would be required to enable credit cards they issue to be processed over at least two unaffiliated networks. One could still be Visa or Mastercard but the other would be an independent network like NYCE, Star or Shazam, or a competitor like American Express or Discover. Merchants would then decide which to use, forcing networks to compete over fees, service and security.

Consulting firm CMSPI says competition would save merchants $11 billion a year, with most of the savings passed on to consumers. And the Federal Reserve says independent networks have one-fifth the fraud of Visa and Mastercard’s networks, further benefiting consumers. The bill applies only to financial institutions with $100 billion in assets, so community banks and virtually all credit unions are exempt. Credit card rewards would be protected, since those are determined by banks that issue cards, not networks that process transactions. And network routing is a back-office process, so consumers would keep the cards they have now.

Of all vendors I deal with, the card industry is the only one that refuses to negotiate. It’s time for banks and card networks to compete the same as small businesses across America and stop artificially driving up prices when families are struggling with rampant inflation. And the way to make them do that is for Maine’s congressional delegation to support the Credit Card Competition Act in 2023.