Support Small Businesses By Reforming Swipe Fees

By: Joe Kefauver, Senior Advisor to Americans for a Modern Economy

April 2, 2025

Picture this: You walk into your favorite Michigan coffee shop, grab a latte, swipe your card and leave a tip. You assume that you’re fully supporting a local business, right? Not quite. Behind the scenes, Visa, Mastercard and big banks are quietly siphoning a chunk of that transaction — up to 4% — straight into their pockets.  

Swipe fees don’t just drain a small business’s profits, they’re an industry racket. Every time a consumer swipes their credit card; big banks take anywhere from 2 to 4% of the total transaction. If that seems like a small amount, consider that retailers nationwide fork out more than $224 billion in swipe fees a year. Add it all up and it’s a cash cow for big banks at a time when Michigan’s small businesses are still struggling with myriads of financial and regulatory pressures. 

And it gets even more ridiculous — these fees don’t just apply to the cost of goods and services. They’re slapped onto sales taxes, tolls and tips, meaning Michigan residents are literally paying a fee on top of a fee. In fact, swipe fees on sales taxes alone costs Michigan businesses upward of $200 million in a single year.   

It’s not just businesses and consumers feeling the squeeze. The Mackinac Bridge Authority shelled out more than $342,000 in credit card swipe feeslast year. That’s money that could be used for maintenance, infrastructure or virtually anything other than lining the pockets of financial giants. Even worse for motorists, who were forced to add a 2.3% fee on tolls paid by credit card to keep up with the escalating swipe fee costs. 

For many Michigan businesses, swipe fees are now their highest operating cost outside of payroll. And while some customers assume paying with plastic is just another convenience, here’s the spoiler: It’s not. Swipe fees quietly inflate prices for everyone — including cash-paying customers. With inflation, rising costs and fluctuating consumer demand already straining businesses, many are left with two bad choices: absorb the losses or pass costs along to customers. Either way, Michigan families pay the price. 

And here’s the kicker: Michigan law actually prevents businesses from fully disclosing these fees to customers. That means businesses are forced to either eat the costs or bake them into higher prices across the board.  

The worst part is that lower-income consumers who rely on cash or debit cards end up subsidizing the spending habits of wealthier cardholders. Premium rewards cards — the ones racking up airline miles and luxury perks — also carry the highest swipe fees, creating a backwards system where everyday families are unknowingly footing the bill for someone else’s first-class upgrade. It’s a reverse Robin Hood effect that’s costing Michigan households more than $1,100 a year. 

Meanwhile, Visa and Mastercard — controlling more than 80% of the market — keep jacking up junk fees with zero accountability, all while recording record-breaking profits. Just recently, JPMorgan reported $49.6 billion in annual profit, the highest ever for a U.S. bank.  

But it doesn’t have to be this way. Other states are fighting back. Last year, Illinois passed the Interchange Fee Prohibition Act (IFPA) to eliminate swipe fees on taxes and tips. This year, more than a dozen states and Washington, D.C., are pushing similar reforms. Michigan lawmakers should take note. 

At the federal level, the bipartisan Credit Card Competition Act (CCCA)remains stalled, with no signs of moving forward. This bill aims to introduce real competition into payment processing, reducing costs for businesses and consumers alike. But waiting on Congress is a gamble. Michigan lawmakers would be wise to act now to keep more money in local economies and out of the hands of billion-dollar corporations. 

Michigan businesses and consumers deserve better. It’s time for lawmakers to step up, take on the credit card giants, and put an end to this costly cycle of swipe fee exploitation. 

Americans for a Modern Economy is committed to ensuring that local, state and federal policies reflect changing technologies that are reshaping the way consumers, businesses and communities operate in the 21st century economy. We work with consumer advocates, businesses, think tanks, economic experts and others to raise awareness and inform discussions about the current and future policy challenges of new technology. We serve as a resource for lawmakers to help them develop modern policy solutions that benefit all Americans by expanding consumer freedom, allowing businesses to best serve their customers and preserving free market competition.