Opinion | Alabama lawmakers should cut unfair credit card fees for small businesses

Alabama is home to thousands of small businesses—many of which are the independent convenience stores that my organization represents. These enterprises are more than just economic engines. They are the heart of local communities—creating jobs, fostering innovation, and shaping the culture of our state. 

Running a small business isn’t easy, thanks in part to ever-increasing “swipe fees” that are imposed by credit card giants. Fortunately, soon-to-be proposed legislation in the Alabama statehouse would begin to chip away at these fees. 

When a customer swipes, inserts, or taps a credit card at a store in Alabama, the small business is charged a fee that amounts to between two and four percent of the transaction amount—a total that includes more than just the cost of the item. “Swipe fees” are also applied to state and local sales taxes, as well as tips. 

For many Alabama small businesses, these “swipe fees” amount to the second highest operating expense behind labor costs. Merchants across the U.S. paid a staggering $172 billion in “swipe fees” in 2023. And because small businesses often don’t have the wiggle room to absorb this added expense, consumers end up footing the bill. In fact, “swipe fees” cost the average American family over $1,100 in a given year. 

Consolidation in the credit card industry is largely to blame for this dynamic. Visa and Mastercard—the two culprits behind this scheme—control 80 percent of the credit cards in circulation. This market share grants the corporate giants monopolistic power to raise “swipe fees” without fear of backlash. Small businesses are being held hostage with few other alternatives.

And up until this point, Visa and Mastercard have taken full advantage of their mob-like control of the payments sector. Since the COVID-19 pandemic, “swipe fees” have ballooned by 50 percent—well surpassing inflation rates of the broader economy. 

But that could change going forward. Alabama lawmakers will soon consider legislation that would begin to chip away at the credit card giants by eliminating “swipe fees” on sales taxes and tips. If passed, the measure would empower small businesses to keep more of their hard earned revenue and keep consumer prices more competitive. Similar measures are already being floated in other states like Arizona. Alabama could be next.

Separately, “swipe fees” have also attracted the attention of lawmakers in our nation’s capital. 

A bipartisan bill called the Credit Card Competition Act—which has earned the support of Vice President J.D. Vance among others—would address the Visa-Mastercard duopoly by injecting more free market competition into the payments industry. Specifically, the bill would require big banks with over $100 billion in assets to include more options for how small businesses can process credit card transactions beyond Visa and Mastercard.

In doing so, smaller credit card networks would be able to compete for a merchant’s business by offering lower “swipe fee” rates. Estimates suggest the measure would save businesses and consumers over $16 billion annually. It’s no wonder that polling finds 77 percent of small businesses nationwide support the federal proposal. 

While federal action is still pending, state lawmakers in Alabama have the opportunity to lead by example. Passing legislation to eliminate “swipe fees” on taxes and tips would deliver much-needed relief to small businesses and everyday Alabamians.