Last month, I had an eye-opening discussion with my esthetician. While catching up during my appointment, she mentioned that credit card processing fees were increasing. I was shocked to learn that depending on the card, she’s absorbing a 3-5% fee per transaction, totaling a staggering $15,000 last year. 

Let that sink in. $15,000 just to accept credit card payments.

The conversation has made me think differently about how I pay at small businesses. Like everyone else, I love getting travel points and cash back rewards on my credit card purchases, but at what cost?

The Reality for Small Business Owners 

While I certainly enjoy earning 2-5% back on what I buy, it’s important to remember that small businesses are the ones actually paying those fees. Every time you swipe your rewards card at your local coffee shop or boutique, they’re paying 3-5% of your purchase to the credit card companies. For many small businesses, these fees have become their third-highest expense after rent and payroll.

Unlike large corporations that can absorb these costs or negotiate better rates, small businesses are stuck between a rock and a hard place. They can’t really refuse credit cards (who carries cash anymore?), but it’s also difficult to raise prices to cover growing fees without risking losing customers.

A Better Way to Shop Local 

This doesn’t mean I think you should give up using your credit card entirely. Here’s how I’m considering adjusting the way I approach making purchases:  

• Using credit cards for big retailers, travel, and major purchases where points and purchase protection make sense
• Using a debit card or cash when I’m shopping at local businesses I want to support
• Taking advantage of cash discounts at small businesses; the money they save on processing fees helps keep their prices lower for everyone

Tips For Small Business Owners 

If you run a small business, don’t be afraid to:

• Offer cash discounts or a dual pricing model (many customers will understand when you explain why!)
• Factor processing fees into your pricing strategy. If you haven’t raised your prices in years, like a lot of business owners I know, it’s okay to make an adjustment to account for increased fees
• Be transparent with customers about the impact of fees on your business

Making a Bigger Impact on Your Community

It’s easy to reach for your credit card to make a purchase out of habit or in pursuit of rewards, but it’s becoming increasingly clear that doing so can have a negative impact on the local businesses you’re trying to support – and supporting small businesses as best we can is a critical way to keep our communities unique, vibrant, and resilient. Think about the impact small businesses have on the economy and on our families, from creating jobs to sponsoring kids’ sports teams to offering comfortable and familiar places to gather. We’re certainly all going to continue to do business with large corporations, but being thoughtful about when and where you use a credit card versus a debit card or cash can make a real difference to business owners in your community.

^{This material is distributed for informational purposes only. Investment Advisory services offered through Journey Strategic Wealth, a registered investment adviser registered with the U.S. Securities and Exchange Commission (“SEC”). The views expressed are for informational purposes only and do not take into account any individual’s personal, financial, or tax considerations. Opinions expressed are subject to change without notice and are not intended as investment advice. Past performance is no guarantee of future results. Please see Journey Strategic Wealth’s Form ADV Part 2A and Form CRS for additional information.}