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Deeds: Credit card changes hurt small business

Deeds: Credit card changes hurt small business

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The road to post-pandemic economic recovery hasn’t been easy. For over a year, my fellow small business owners and I struggled to make ends meet and keep our life’s work afloat. While our businesses and our employees received some much-needed help via President Joe Biden’s American Rescue Plan, I believe that I speak on behalf of all small businesses when I say that we still need economic help wherever and whenever we can get it.

However, for the last decade I’ve watched big corporations such as Target and Amazon reap huge profits at the expense of small businesses.

Back in 2011, Sen. Dick Durbin of Illinois snuck in an amendment that capped interchange fees on debit card transactions to 22 cents, instead of just a small percentage of the transaction, and added routing mandates to debit transactions. Even though corporations got an extra $90 billion in profits, more than 98% of them either raised prices or kept them the same.

As a result of the changes, banks lost big and predictably made changes to earn back their lost revenue. From eliminating free checking accounts to increasing account fees, banks made it difficult for consumers to access affordable banking services. A 2014 study from George Mason University reported that the Durbin amendment led to an increase in the unbanked population by 1 million Americans.

Worse yet, banks passed their losses onto small businesses by making it expensive for us to handle small debit card purchases. We went from paying 1% on small debit card transactions to a flat rate of 22 cents, a nearly 1,000% increase in many cases.

While we struggled to regain our lost income, I witnessed how Main Street Virginia shops were forced to close their stores for good. All this occurred while big businesses like Amazon and Walmart raked in billions of dollars and continued to make a fortune.

Even after stuffing their pockets at our expense, big corporations still want more. Now, they want to cap credit card interchange fees and add routing mandates to credit transactions.

Banks will lose even more money and again pass their losses onto our local businesses by charging the full interchange fee cap for every small purchase.

We’d again have to make the difficult choice of having to close down the business that we’ve invested tirelessly in for years. Banks will also raise interest rates, charge higher fees, and raise credit standards, creating a wealth transfer of $40 to $50 billion a year from ordinary people to massive retailers.

We know where our state stands on this. Back when Congress was still considering Sen. Durbin’s debit card regulations, Sen. Mark Warner stood up for ordinary Virginians and urged caution before implementing these changes.

I applaud Sen. Warner’s efforts 10 years ago, and I hope he and Sen. Tim Kaine will fight against the proposed changes to our nation’s credit card market. Our small businesses depend on them to keep up this fight.

Siobhan Deeds is the owner of Pumpkinseeds in Lexington.

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