Inflation and Skyrocketing Credit Card Fees: A Double Blow to Consumers

Inflation has sharply impacted financial well-being across various demographics, with Native Americans experiencing the greatest strain. According to recent surveys, 69% of Native Americans report “serious financial struggle” due to inflation, surpassing other groups. In response, tribes have sought relief through the Inflation Reduction Act; however, further action from Congress is deemed crucial. Specifically, efforts to lower credit card swipe fees could provide significant financial assistance to these communities.

Every credit card transaction incurs a swipe fee, a percentage that merchants pay to process payments. As these fees escalate, businesses, particularly those with thin profit margins, are compelled to raise prices. This increase drives more transactions and enhances the fees paid to credit card firms, creating a vicious cycle of rising expenses.

In Arizona, credit card processing fees cost merchants, including those on reservations, approximately $1.9 billion annually. For many businesses, these fees surpass other costs, notably healthcare and utilities, ranking just behind labor. Native-owned businesses frequently report challenges in managing expenses and securing credit, hampering their ability to invest in growth while keeping consumer prices stable.

The repercussions of increased fees hit Native American consumers hard, especially given their poverty rate, which stands at nearly 27%, almost double the national average. Swipe fees inflate prices irrespective of payment methods, burdening consumers. On average, American households face over $1,100 in annual price hikes due to these fees, exacerbating financial difficulties.

Major credit card companies, particularly Visa and Mastercard, reap substantial rewards from the current fee structure. In the past decade, these fees have more than tripled, with Visa and Mastercard earning over $100 billion last year alone. Their dominance, accounting for 80% of market share, effectively creates a duopoly, limiting competition and enabling high pricing.

Proposed legislation, the Credit Card Competition Act (CCCA), presents a promising solution. This act allows merchants to choose from multiple routing networks for processing transactions, increasing competition and potentially lowering swipe fees. Importantly, it protects smaller financial institutions, ensuring they remain focused on community needs.

Support from Senators Mark Kelly and Kyrsten Sinema for the CCCA could mark a pivotal step in addressing this issue. Failure to pass the act would indicate a preference for large banks over tribal enterprises. The CCCA’s passage could deliver essential financial relief to Native American businesses and communities, fostering economic resilience.

Kevin Cassadore, former CEO of Peridot District Economic Enterprises and general manager of the San Carlos Apache Tribe, advocates for these changes to bolster local economies.