Credit and debit card fees are a big monthly expense for many small businesses operating on thin margins. Those costs are passed on to consumers and are becoming more onerous as fewer consumers carry cash, reports The New York Times.

Merchants of all sizes paid a total of $172 billion in processing fees in 2023, up from roughly $116 billion the year before the pandemic, according to the Nilson Report, which tracks the payments industry. That’s a 48 percent increase.

The Times reports that when they swipe a credit card, businesses pay fees to the bank that issues the card, to the payment network and, often, to companies like Toast and Square that help process the transaction. The biggest share of those fees — averaging more than 2 percent of a transaction amount — is set by payment networks like Visa and Mastercard and paid to the issuing bank, ultimately benefiting both the banks and the networks.

Susan Stephan, director of the master of legal studies program at UC Law, spoke with The Times for a story about the growing problem. 

“This concern is not going to go away,” Stephan told The Times. “Consumers are really concerned about rising costs in every arena, and this is one where there’s actually the potential for legislation to make a difference.”

Stephan teaches antitrust law along with intellectual property, information security, federal privacy, cyberlaw, blockchain and cryptocurrency law, workplace technology, alternative dispute resolution, law and economics, administrative law, workers’ compensation, and labor and employment law.

The Times reports the Justice Department in September filed an antitrust lawsuit against Visa, accusing the company of unfairly stifling competition in debit cards and charging unnecessarily high fees. Groups representing small business owners have cheered on that lawsuit.

Senator Richard Durbin, Democrat of Illinois, led a bipartisan effort to rein in credit card swipe fees with a bill introduced last year called the Credit Card Competition Act. The proposed law would force large banks that issue credit cards to enable at least two networks to process payments made with those cards. It would likely increase competition between payment processors beyond Visa and Mastercard, which could lower fees.

The stance of the incoming Trump administration on regulating payment systems remains unclear. 

Read the story in The New York Times online.

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