While more consumers opt for credit over cash, small business are likely to see processing fees eat away at more of their already thin margins in the coming year, NBC News reported.

Merchants paid an average of 2.6% in swipe fees for transactions using the Visa and Mastercard networks in 2023, according to the Nilson Report provided to the outlet. Even though federal rules cap debit card swipe fees at 21 cents per transaction, those for credit cards can be higher.

In 2023, 32% of all consumer payments were on credit cards, up from 24% in 2019, according to a Federal Reserve study. At the same time, use of cash dipped from 16% in 2023 down from 23% in 2019.

Gene-Christian Baca, the owner of Walter's Hot Dogs in Marmaroneck and White Plains, New York, estimated that he now pays about $50,000 a year in costs associated with processing credit card transactions.

"Every year, 3% of all of our sales is washed away just to credit card processing," he told NBC News.

And that number is likely to go up in 2025. Visa raised two of the credit card swipe fees it charges banks and processing companies on Jan. 1. Critics say ultimately those transaction fees will just be passed on to the consumer.

"Most likely, higher swipe fees from Visa would mean higher prices for people at the store eventually," said Matt Schulz, chief credit analyst at LendingTree. "It's unclear as to how quickly that would happen, but generally speaking, when these fees tend to go up, merchants would tend to pass those extra costs along to consumers."

The Merchants Payments Coalition said credit cards companies earned a record $172 billion in swipe fees in 2023 and cost the average family $1,100.

Visa has defended its transaction fees, saying they're designed for the benefit of the consumer.

"We are constantly enhancing our network to better serve the businesses and consumers that increasingly choose to transact with us. Everything we do is designed to make paying and being paid with Visa more convenient, secure and reliable," a spokesperson told the outlet in a statement.

While Americans embrace the use of credit cards for their convenience, many also have decided to not pay them off. Card lenders wrote off $46 billion in seriously delinquent credit card loan balances in the first nine months of 2024, a 50% increase from the same time period in 2023, according to BankRegData.

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