Who won Black Friday? Credit cards did and Texans paid the price

Hidden swipe fees are an inflation multiplier that cuts into business growth.

By John McCord

Dec. 5, 2024 | Updated 1:30 a.m. CST

Who were the big winners of Black Friday? Not Texas shoppers and their spending power or Main Street businesses. The biggest winners were a few Wall Street credit card companies that raked in billions from hidden swipe fees.

Swipe fees will total about $20.1 billion in the holiday season alone, with over $1.9 billion coming from Texans. While holiday shoppers don’t see these charges on their receipts or credit card statements, they hit local businesses hard, resulting in higher prices for every purchase and for every Texan.

Every credit card transaction carries a fee, typically between 2.5% and 4%, paid by local businesses to banks and card networks like Mastercard and Visa. These fees add up quickly, cutting into business growth and customer buying power. In fact, for many small businesses, the financial companies’ profit margin on a credit card sale far exceeds that of the actual small business that took the risk to open their doors, create jobs and support the local economy.

The impact of swipe fees goes beyond small businesses, unfortunately. As the banks and card networks continually increase their fees, they quietly drive up costs for everyone. American families unknowingly contribute an estimated $1,100 to $1,700 annually due to these charges, money that could be spent on savings, education or health care. In Texas, these fees translate to over $10 billion annually, creating an unnecessary burden on households and local businesses.

The toll in the Dallas-Fort Worth-Arlington metro area alone is staggering. According to the Federal Reserve Bank of St. Louis, DFW-Arlington had a reported $688.9 billion in GDP as of 2022, representing about 2.65% of the U.S. economy. Assuming the share of GDP reflects the share of card spending, an estimated $531 million in card fees will be paid in the DFW–Arlington metro area during the 2024 holiday season.

Even larger retailers, despite their size, are not immune. They often have entire teams to manage disputed transactions and otherwise control skyrocketing costs in a low profit margin industry. These inefficiencies ripple through the economy, slowing growth and innovation here in Texas while Wall Street makes unprecedented earnings. Whether buying groceries, dining out or shopping online, our local consumers ultimately bear the cost of these hidden fees.

Texas retailers understand there’s a cost to doing business and accepting credit card payments. But our credit card market is uniquely broken. Unlike other business expenses, like rent or inventory, swipe fees are dictated by a small group of credit card networks and banks, leaving merchants with no choice but to accept the ever-increasing rates. These fees contribute to higher prices in an already challenging economic environment, adding to the inflationary pressures consumers are facing. 

We do not have to live this way. In Europe, swipe fees average nearly six times lower than we pay in the U.S. because they have regulations to mitigate the lack of competition. Further, a bipartisan bill being debated in Congress by Rep. Lance Gooden of Texas and others would improve competition, saving Texans an estimated $1.5 billion every year.

Texas is the world’s eighth-largest economy, and we don’t believe we must wait for Washington, D.C., to address a problem that is costing Texans daily. This is why the Texas Retailers Association, a trade association representing small and large retailers across Texas, is a founding member of Texans Against Hidden Credit Card Fees. This newly launched coalition composed of Texas business owners and consumers advocates for greater transparency and competition within the credit card market in our state and across the country.

Texas has many laws on the books to protect our consumers from anticompetitive business practices. With the next legislative session beginning in January, now is the time to expand these laws to prohibit the most egregious credit card practices that are costing Texas consumers billions.

Hidden swipe fees act as an inflation multiplier, lining the pockets of Wall Street at the expense of every Texan. We deserve a credit card market that prioritizes competition and transparency — one that lowers costs, empowers businesses and lets consumers keep more of their hard-earned money.

Texas must lead the charge in demanding an economy that works for everyone, not just the credit card giants.

John McCord is the executive director of the Texas Retailers Association.