Op-ed | Credit Card Competition Act would put Brooklyn ahead of Wall Street

Soaring “swipe” fees from credit card companies are hurting small businesses like Three Guys From Brooklyn, owner Phil Penta writes.
Photo by Phil Penta

As a grocer in a neighborhood where a third of customers qualify for SNAP (food stamps) keeping prices low is a top priority at Three Guys From Brooklyn. We haggle with suppliers every day and are an open-air market with more outdoor space than indoor. For years, our awning read “The Original Poor People’s Friend.”

But as much as we scrimp and pass the savings on, there’s one expense we cannot control: soaring “swipe” fees giant banks and credit card networks charge merchants to process transactions.

Unknown to most consumers, credit card swipe fees average 2-4% of each transaction and are most merchants’ highest operating expense after labor. Visa and Mastercard credit card swipe fees have quadrupled since 2010, topping $100 billion last year, and total swipe fees reached $172 billion. These fees are far too high to absorb and drive up prices by over $1,100 a year for the average family, impacting food, clothing, medicine and just about anything they buy.

Swipe fees are one of our biggest pain points as we fight to make food affordable. We’ve changed card processors five or six times to bring them under control, but with little to show: our fees of over $10,000 a month recently jumped to $16,000.

While merchants can shave pennies by changing processors, the real problem is Visa and Mastercard, which control 80% of the market. They centrally price-fix fees charged by all banks that issue their cards rather than letting banks compete to offer a better deal. And they restrict processing to their own networks even though others could do the job for less with better security. No matter how large or small your business, they refuse to negotiate.

Fortunately, Congress is doing something. The bipartisan Credit Card Competition Act would make banks with over $100 billion in assets enable credit cards to be processed over at least two unaffiliated networks – Visa or Mastercard plus a competitor like NYCE, Star or Shazam. That would create competition over fees, security and service, saving $16 billion a year.

If this legislation is enacted, we could improve wages for employees and do more to support our community. Most importantly, it would help us hold down prices for customers and make it more affordable to put food on their tables. I urge Senators Chuck Schumer and Kirsten Gillibrand to stand up for feeding people who need to be fed over making rich bankers richer. It’s time to put Brooklyn ahead of Wall Street.

Phil Penta is managing partner of Three Guys From Brooklyn, a single-location grocery store in Brooklyn.