Swipe Fee Reform Can Help Colorado Restaurants

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

March 5, 2025

Colorado restaurants are in survival mode. A combination of rising food, rent and labor costs have pushed many to the brink. In fact, during the past three years, the number of licensed restaurants in Denver has plummeted by 22%, while longtime local favorites across the state like Mountain Shadows, Drifter’s Hamburgers, and China Town in the Pikes Peak region have closed their doors. Sadly, they won’t be the last unless something changes.

But though overall inflation and increasing minimum wages are often blamed for these closures, there’s another, less visible culprit squeezing the life out of Colorado’s restaurants: swipe fees.

These hidden charges — the 2% to 4% feescredit card companies like Visa and Mastercard collect every time a customer swipes their card — are quietly draining profits from local restaurants at a time when they can least afford it.

Last year alone, swipe fees cost restaurants across the country a staggering $93 billion. And, according to merchant consulting company CMSPI, recent swipe fee increases are expected to cost restaurants and other merchants an additional $502 million annually. For small, family-run restaurants already battling rising costs, this may be their final straw.

Swipe fees are now most small businesses’ second-highest operating cost after labor. Unlike larger chains that can negotiate better rates or absorb the losses, small restaurants are left with few options. They can’t just eat the cost, so they’re forced to raise prices or cut staff — neither of which is sustainable in the long run. And when customers see higher menu prices, they often blame the restaurant, not the hidden fees driving up the cost.

It’s a vicious cycle. Rising fees lead to higher prices, which lead to fewer customers, which lead to more restaurant closures. And it’s happening at a time when Colorado’s food service industry is already on shaky ground. According to recent Wallet Hub data, food prices have increased 28% in the last five years. Combine that with skyrocketing property taxes and a minimum wage that nearly doubled in the past decade, it’s no wonder restaurants are struggling to stay afloat.

Fortunately, there may be relief on the horizon for Colorado restaurants. This month, state lawmakers introduced HB-1282, a bipartisan bill that aims to exclude taxes and gratuities from swipe fee calculations — charges that should never have been fair game in the first place. And Colorado isn’t alone. Thirteen other states have introduced similar legislation this year alone, with Illinois passing a billlast year that banned credit card companies from applying swipe fees to sales taxes and tips.

At the federal level, the Credit Card Competition Act (CCCA) could go even further in helping Colorado’s restaurants. This bipartisan legislation would inject real competition into the credit card payment market, limiting the power of Visa and Mastercard — which control more than 80% of the marketplace — to set exorbitant fees. By increasing competition and driving lower swipe fee rates, the CCCA would help reduce operating costs for restaurants, giving them the breathing room they need to stay open and keep serving their communities.

The problem is Congress has remained locked in a stalemate over the CCCA, and there’s no clear signal for when that will change. Colorado lawmakers were wise not to wait — HB 1282 gives the state a chance to lead, providing immediate relief for restaurants and small businesses while Washington plays catchup.

Big banks and credit card companies are predictably fighting these reforms, claiming it would hurt their bottom line and reduce consumer benefits. But let’s be real — does anyone really believe companies like JPMorgan Chase, which reported $54 billion in annual profits last year, can’t afford to make small adjustments? These financial giants are thriving while Colorado’s small businesses are drowning.

For restaurants with razor-thin margins, every dollar lost to swipe fees is a dollar that could have gone toward wages, rent, or keeping the lights on. HB-1282 would allow restaurants to reinvest into their operations, keep prices fair and continue serving their communities — ensuring every dollar earned stays where it belongs.

Colorado’s restaurants are more than just places to grab a meal — they’re the heart and soul of our communities and the backbone our economy. Passing HB-1282 reaffirms the state’s commitment to their success.

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.