Credit cards: surcharges surge as US businesses pass costs on to customers

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American business owners have long chafed at the high cost of accepting credit cards. Complaints over these so-called “swipe fees” have only grown louder since the pandemic. That prompted more shoppers to ditch cash for card or contactless payment methods.

Credit card purchase volumes jumped 51 per cent between 2015 and 2021, figures from the Federal Reserve show. Transaction values were up 60 per cent over the period.

Last year, US merchants paid a record $160.70bn in processing fees to accept $10.6tn in card payments, according to the Nilson Report. The bulk of those fees — about 79 per cent — was from credit cards.

Many companies’ profits margins are narrowing as they get squeezed by higher inflation. That has prompted a growing number of businesses to attempt to pass higher costs on to their customers. They are adding a surcharge or a convenience fee on those who want to swipe their plastic.

Payment consultancy TSG reckons between 5-10 per cent of 8mn card-accepting small businesses in the US now charge fees for credit card usage. That is up from 2 per cent five years ago. Underscoring the growing trend, TSG said about 15 per cent of new merchants who accept card payments have a surcharge policy.

Business owners may feel they have no choice. Credit card fees, which average 2-4 per cent of the transaction amount, are most merchants’ highest operating cost after labour, says the National Retail Federation. Surcharges help cover the interchange fees that they would otherwise pay to card network and bank.

The risk, of course, is consumers can opt to pay in cash or patronise another business altogether. Going cashless sounds sleek and futuristic — until it bumps up against the reality that there is a price to pay.