By BENNY HODGES
Belen

With Memorial Day weekend right around the corner, many Americans will be packing up their cars for trips to their favorite destinations. However, as folks fill up with fuel or stock the cooler with hot dogs and beverages, Visa and Mastercard will be right alongside every swipe of a credit card taking their cut. That’s because, unbeknownst to many, every time a credit card transaction is processed, merchants are charged on average between 1.5-3.5 percent of the total purchase amount, known as a swipe fee.

While initially charged to merchants, swipe fees are passed on to consumers as they add to inflation and higher prices. It’s estimated this year that swipe fees will add $119 million to Americans’ costs of fueling their cars during Memorial Day weekend alone. It’s estimated that credit card swipe fees cost the average American household more than $1,100 a year in elevated prices – making upcoming travels just a portion of the year round burden. 

Unfortunately, credit card swipe fees continue to increase thanks to the unchecked dominance of Visa and Mastercard. The two corporations together have consolidated over 80 percent of the market, setting cartel-prices for ever-rising swipe fees that all their banks charge without competing with each other at all. As a result, New Mexico merchants and their customers are paying almost half a billion dollars every year in swipe fees, an expense that is now second only to labor for so many businesses.

This is why it’s critical for lawmakers to take action and pass the Credit Card Competition Act (CCCA). This bipartisan piece of legislation would leverage competition, a key market force, to motivate major credit card companies to reduce their swipe fee rates and improve their services. To do this, the CCCA would ensure banks offer merchants a second routing network when processing transactions, allowing for some competition among those networks for merchants’ business. This means alternative networks like Pulse or Shazam that currently operate in the debit space could begin offering businesses better services at a lower cost, thus breaking the grip of the Visa/Mastercard duopoly.

The impact on small businesses would be immense as the CCCA is estimated to save New Mexico merchants almost $80 million a year. That revenue would then be used to keep prices lower for consumers, and hire and pay employees more.

It’s also a big reason major unions like the International Brotherhood of Teamsters and the Service Employees International Union have endorsed the CCCA. By lowering costs, passing the CCCA means American workers can keep more of their hard-earned wages as they shop for their weekly groceries or host a Memorial Day barbecue.

Without action on swipe fees, major financial institutions like Visa and Mastercard continue to win, while consumers and merchants are exploited by a system they have no leverage to change. I hope Sens. Martin Heinrich (D-NM) and Ben Ray Lujan (D-NM) will throw their support behind the CCCA and stand up for Main Street. The time to lower costs and deliver relief from swipe fees is now.

Benny Hodges is president of Hodges Oil Company, Inc., a third-generation owned petroleum business in Belen, N.M.