Lindsey Lee knows his customers at Cargo Coffee and Ground Zero like to use credit cards, and he doesn’t want to keep them from doing so. But some months, the fees he is charged for that credit card use can cost him more than he spends on milk.

“That’s a lot of lattes,” he said.

Lee was one of three local merchants who gathered Thursday at the Great Dane Hilldale to talk about the way interchange, or swipe, fees impact their businesses. Bob Johnson, president of Consumers for Competitive Choice, said the fees average about 2 percent of the business transactions in the U.S. His organization wants Congress to include credit card fees as part of financial regulatory reform.

The problem, merchants and Johnson say, is not that the fees exist. It’s that they have gone up, that they vary depending on what card is used and that the fees are unregulated.

“It works as a hidden tax on consumers and businesses,” Johnson said.

In November, the U.S. Government Accountability Office released a report that said rising interchange fees have increased costs for merchants, but options for reducing fees pose challenges. The GAO added that the fees are a significant source of revenue for smaller credit card issuers such as smaller community banks and credit union, and a source of profit for larger banks.

Besides the benefits for smaller banks and credit unions, Michael Semmann of the Wisconsin Bankers Association, said fees help provide fraud protection for consumers and merchants.

“It’s another cost of doing business,” he said. “If the federal government gets involved, will you see prices decrease? They’re asking the public to get involved in a fight where they aren’t going to see any benefit.”

Johnson and the merchants say the fees, which Johnson said added up to $48 billion last year, ultimately do hurt consumers.

“We believe that fee is as much as 90 percent too high,” Johnson said. “So we believe there is as much as $41 billion or $42 billion that could be back in our economy helping to stimulate an economic rebound.”

John Kavanaugh, owner of the Esquire Club, said credit card use has risen to as much as 85 percent use at his restaurant and estimates he pays $2,000 to $3,000 a month in fees.

“We’re paying 2 percent to the credit card companies to get our own money,” he said.

In May, President Barack Obama signed a law that included restrictions on interest rates and late fees. Johnson’s Indianapolis-based organization wants the interchange fees to be part of legislation Sen. Christopher Dodd, D-Conn., is drafting for further regulatory reform.

Tim Metcalfe, owner of Metcalfe’s Market, said the total he pays in fees each year equals about half his rent.

“That’s a very high cost that’s being passed on to everyone,” he said.

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