Consumers are fed up with credit card swipe fees, but the real culprit isn't the banks—it's the businesses charging you extra at the register. That's the argument from Gene Marks, a certified public accountant and founder of The Marks Group, who says small-business owners are mishandling a routine cost of doing business.
Marks recounts his own frustration: his dentist recently added a 3.5 percent surcharge for credit card payments. He's seen similar warnings at diners in New Jersey and coffee shops in Philadelphia. “Enough is enough,” he writes, but his ire is directed not at financial institutions but at the merchants themselves.
Small businesses have made swipe fees a populist cause, and politicians are happy to oblige. States including Illinois, Colorado, Maine, Delaware, Arizona and Pennsylvania have moved to restrict the practice. Supporters argue that swipe fees hit Main Street harder than big corporations, which can negotiate better rates. But Marks, writing for The World Signal, isn't buying it.
“I am not going to argue the economic model that justifies why a financial institution would charge swipe fees,” he says. “These are businesses, and like the small businesses that complain, they also have their costs to recover.” He warns that government price controls set a dangerous precedent, noting that similar regulatory interventions in energy markets have had mixed results.
The real issue, Marks argues, is pricing strategy. He points out that smart business owners already absorb fluctuating costs for materials, insurance, labor and rent. Swipe fees should be handled the same way. Instead of adding a separate charge that annoys customers, he says, merchants should spread the cost across all products and adjust prices slightly.
“I will pay $13.50 for a burger instead of $13.25 without blinking,” he writes. “Why don’t restaurants just do this?” The same logic applies to his dentist: a $258.75 cleaning instead of $250 would go largely unnoticed if not highlighted as a surcharge.
Marks dismisses the political uproar over swipe fees as a distraction. “The only people who profit by making this a political issue are politicians and lobbyists,” he says. He notes that banks will find other ways to recover costs if fees are capped, much like airlines adjust routes when fuel costs rise.
For small-business owners struggling with margins, Marks offers a simple solution: “Open up your spreadsheet. Download the data from your accounting system. Figure out what your annual credit card fees are costing. Spread those fees across all of your products. Then recalculate your pricing based on the full picture.” If numbers aren't your forte, he adds, have your accountant do the math.
The bottom line, he says, is that customers don't resent higher prices nearly as much as they resent being nickel-and-dimed. “My dentist didn’t make me angry because he raised prices,” Marks concludes. “He made me angry because he singled out one cost and asked me to pay it separately.”
