It’s no secret prices are rising. From energy costs to groceries, which are up 2.4 percent from just one year ago, Iowans are increasingly feeling the pinch. President Trump recently visited our state to validate these same concerns, and now it’s time for Congress to pass through legislation that lowers prices and delivers the president’s agenda.
An often overlooked place to start is addressing ever-increasing credit card swipe fees that drive up costs for business owners and frequently get passed on to consumers. Iowa has a thriving small business community, but swipe fees are hammering its bottom line, with the amount paid more than quadrupling since 2010. At that pace, they’ve become the second-highest operating expense for many businesses, forcing merchants to up their prices or close their doors.
For consumers, this means the average American family is now paying upwards of $1,800 a year because of swipe fee-induced price hikes. And this number is only growing, because swipe fees are an inflation multiplier. When anyone uses their credit card to pay, the business incurs a swipe fee that averages around 2.35 percent of the total transaction amount. That fee then forces the merchant to raise prices to cover the cost, which, in turn, increases the swipe fee amount charged from the next transaction, feeding a vicious cycle of financial pain for businesses and consumers alike.
Unfortunately, this system was created by design by Visa and Mastercard, which have used their domination of the payments industry market share to suppress any competition and raise fees on command. Their scheduled swipe fee increases carried out by major banks resemble that of a cartel-style price-fixing scheme. Visa and Mastercard simply raise swipe fees, and banks agree to charge the higher rates to avoid competing with each other and improve their own profits. By the time a customer uses their card and a business is charged, the swipe fee has long since been decided, with no opportunity for your local mom-and-pop stores to negotiate.
While many have accepted the status quo, President Trump has taken action to endorse a solution with bipartisan support known as the Credit Card Competition Act (CCCA). This bill would ensure merchants have at least two credit card networks to choose from when processing a transaction. With an alternative network option in the mix, Visa and Mastercard would finally have an incentive to offer reasonable swipe fee rates and better services. It’s estimated that the CCCA would save Iowa nearly $140 million in its first year alone. Keeping that revenue in our local economy would mean merchants could afford to improve wages, hire more staff, and lower prices.
At his core, President Trump has always been a businessman who understands how important fair competition is to any industry and our broader economy. His support for the CCCA exemplifies that and aligns with the overwhelming majority of Americans who support the bill as well. Business as usual is not sustainable and will only make life more unaffordable for everyday Americans.
During the president’s most recent visit to Iowa, he said, “We’re bringing them (prices) down.” It’s time for Sens. Chuck Grassley and Joni Ernst to help the president deliver on his promise by getting the CCCA to his desk to be signed.
