The Facts & Benefits the New York Times Ignored About Credit Card Acceptance

WASHINGTON, DC— A recent article in the New York Times about credit card use and small businesses misses the mark and willfully ignores several critical facts (despite an avalanche of evidence). Consumers and small businesses actively choose credit cards as a payment option because of the convenience, security, and benefits offered. Since the New York Times was not interested in the facts, I will share them with you:

• The rate of interchange and average cost of card acceptance has remained virtually flat for nearly a decade, while sales have steadily increased.

• Credit cards have driven more than $93 trillion in economic activity since 2006 and save small businesses money when compared to cash purchases.
  • Sales through credit and debit card transactions have driven more than $93 trillion in economic activity since 2006, according to purchase volume data from Nilson.
  • The IHL Group, a retail advisory firm, found accepting and processing cash has a substantial cost of at least 4.7% for businesses and more for some retail segments. Credit card processing, on the other hand, is about 2% and capped for debit cards. This means accepting credit and debit cards saved businesses a minimum of $2.35 trillion since 2006 when compared to the equivalent in all-cash transactions.

• Small businesses are unlikely to benefit from the Durbin-Marshall routing mandates:
  • The Congressional Research Service, in a review of the impact of the Durbin-Marshall routing mandates, found “it is unclear who would benefit” from the bill and retailers “might face higher incidences of fraud if payment security is weakened.”
  • Research from the University of Miami’s Department of Finance found, “almost all of [any interchange reduction] will accrue to retailers with $500 million or more in annual sales, with little going to small businesses putting small retailers at a further competitive disadvantage than is currently the case. Further, small business operators receive roughly $12 billion in credit card rewards when they make purchases on credit themselves, which constitutes roughly one-tenth of all credit card rewards. The CCCA would result in the reduction of such programs, costing small businesses over $1 billion in lost rewards as well as a decline in access to credit.”

• The Durbin-Marshall bill puts credit card security at risk.
  • CRS also reported, “the major networks invest in making their infrastructure secure in order to attract customers and profits, if cards are effectively required to be interoperable, networks may be less willing to invest as much in secure payment technologies, as part of the benefit would accrue to their competitors.”
  • PPI cited, “another concern of extending the Durbin Amendment to credit card interchange fees is the possible impact on network security.”
• Consumers will NOT come out ahead.
  • According to CRS, “it is not clear whether retailers would pass interchange savings on to consumers.”
  • Following caps on debit cards, the Federal Reserve Bank of Richmond found 98% of businesses either raised prices for consumers or kept them the same.
  • Academic research from Georgetown University and Yale University found debit card price caps increased fees paid by consumers.  

The National Federation of Independent Business admits the value credit cards have for small businesses saying, “even the smallest mom-and-pop outfits … come out ahead” after factoring in the service costs of credit card acceptance.

And, as a final thought, you might notice the New York Times requires you to pay for a subscription to use their online services. Something which would not be possible without credit cards. Rather than attempting to demonize credit card networks, we must recognize their essential role in promoting economic resilience and empowering consumers and small businesses of all backgrounds.