Credit-Card Fees Squeeze Small Businesses

CHICAGO (TheStreet) -- For a struggling business, every penny counts. Even seemingly small change can make a difference in the bottom line.

That's why independent retailers are questioning the rising fees they have been paying for credit-card processing. So-called "swipe fees," which businesses are charged every time a customer pays with plastic, are at the center of a battle between business owners and credit-card giants MasterCard(MA Quote) and Visa(V Quote).

A small, independently owned business has no leverage against those financial powerhouses. But small-business associations took their case to Washington this week, hoping to spur change in the way credit-card companies are regulated. If Congress approves new oversights, it will send a powerful message about the power of teamwork. Although small companies are often in competition with one another for the same customers, there are times when it pays to come together.

In many ways, credit cards have been a boon to small businesses. Numerous studies have shown that people spend more when they're paying with plastic, and countless stores and restaurants have benefited from those free-spending habits. Small companies that sell exclusively online can thank credit cards for the industry's explosive growth. (Anyone else remember the days when buying on eBay(EBAY Quote) meant heading to the post office for a money order?) There's no question that credit cards have made buying online more convenient and appealing.

But as credit-card usage has ramped up, so have fees. According to the National Retail Federation, total fees paid by merchants to process payments have gone from $16 billion in 2001 to $48 billion in 2008. In the past year, credit-card fees have continued to creep up, at the same time retail profits have sunk. That's a recipe for frustration and resentment.