Credit Card Fees Are a Silent Burden on the Restaurant Industry

For many restaurant operators, rent is one of the top monthly expenses. But for Jordan Rubin, the chef/owner of Mr. Tuna and co-owner of Bar Futo and Crispy Gai in Portland, Maine, the cost of rent is dwarfed by another expense. 

“Credit card fees are our third largest cost behind labor and food costs,” he says. “We are spending over double our rent on credit card fees every month.”

While diners might not realize it, every time they swipe their credit card at a restaurant, they’re contributing to a mounting financial burden for many independent restaurants. Credit card processing fees typically range from 2% to 3.5% per transaction (plus in many cases, a per-swipe fee of about 30 cents).

U.S. businesses paid $172 billion in swipe fees in 2023, including on debit cards, according to data from the National Restaurant Association, and these processing fees have more than doubled in the past decade. It’s adding up to a considerable concern for restaurant owners across the country — especially as consumer payment habits have shifted away from cash.

The move toward cashless payments, initially driven by COVID-era safety concerns, has led to a more permanent shift in consumer behavior. Scott Stein, who owns Bardea Restaurant Group in Delaware, has watched this transformation unfold over his 25-year career in hospitality. “When we opened Bardea Food & Drink in 2019, it was the first restaurant I opened where the guests were really only using credit cards for payment,” he says. Today, he estimates about 99% of his customers pay by card, up from just 20% in 1999. 

This tracks with broader payment trends: According to the U.S. Federal Reserve’s Diary of Consumer Payment Choice, which charts how Americans pay for goods and services, “the pandemic had lasting effects on how consumers made payments.” From 2019 to 2023, cash payments decreased from 26% to just 16%. 

Rubin, who has been running Mr. Tuna for nearly 8 years, sees it firsthand. “There is no doubt that people are paying more with cards,” he says. “With the increase in technology and in the effort to adapt to current times, much of our business is done through online ordering.” (The boom in online ordering, via delivery apps like GrubHub or Caviar, also stems from the pandemic and adds to restaurants’ financial burden thanks to a separate set of fees.) 

These credit card fees might seem small per transaction, but they can add up quickly — for Rubin it’s over $9,000 a month, on average. It’s especially tough for an industry where the average pre-tax profit margin is already razor thin, typically hovering between 3% and 5% for a small business restaurant. And then restaurants have to grapple with persistent inflation impacting the prices of ingredients, higher labor costs, and supply chain challenges in the post-pandemic landscape. 

Credit card fees aren’t just eating into profits – they’re affecting businesses’ ability to grow and invest in their future. 

“We could be using that money for hiring more staff, increasing employee wages and benefits, repairing or replacing equipment,” says Rubin, who also notes that in some cases, the fees “could mean the difference between being profitable or operating at a loss.”

Restaurants have tried various strategies to address the issue, but each comes with its own drawbacks. Some restaurants have opted to raise menu prices to offset the fees, but this risks making a meal too expensive in an already competitive market. Others have taken the more direct approach of adding a separate credit card processing surcharge to bills, though this often leads to customer pushback. (And some states, including Connecticut, have even banned the practice.) 

“For restaurant owners and operators, accepting debit and credit cards is an absolute imperative to best serve their customers, and ultimately, to stay in business,” says Michelle Korsmo, president and CEO of the National Restaurant Association. “However, processing credit card payments is one of their highest costs, often behind only labor and food.” Credit card companies set the swipe fees, and in the last decade, she notes, they’ve doubled the cost of processing a transaction. “When an operator chooses to add a surcharge, they are trying to be transparent with consumers about the hidden costs of swipe fees.” 

While Rubin’s restaurants don’t currently assess a surcharge to cover the credit card processing costs, if policies around regulating credit card companies don’t change, they might have no choice.  

At Mish Mish in Philadelphia, the 32-seat restaurant implemented a different policy to help reduce the cost: limiting the number of credit cards that can be used per table to two. “We did it for time efficiency purposes,” says owner Alex Tewfik. “But also we’re charged every time a card is swiped, which for a tiny restaurant, adds up over the year.” While this approach can frustrate large groups wanting to split checks multiple ways, tools like Venmo and Splitwise can help make it easier.

At the beginning of the pandemic, Ed Crochet and Justine MacNeil turned off the credit card processing system for the take-out orders at their modern Italian restaurant Fiore in Philadelphia. “We couldn’t afford to pay ourselves, so we certainly were not going to give 3% of our sales to American Express,” says Crochet. When they reopened for dinner service, they added a 3% credit card surcharge and got “a decent amount of pushback,” says the chef. 

The couple eventually closed their first location and reopened a smaller cafe serving breakfast and lunch. Instead of processing dozens of higher check sales per night, now they’re doing hundreds of lower cost transactions with one terminal. When they made the change, they negotiated with the credit card processor to remove the per-swipe fee from the contract, saving the business money. 

Despite the challenge credit card fees pose in an industry already full of them, most restaurants just absorb the costs, viewing the fees as an accepted cost of doing business. 

“It’s a tough pill to swallow, but when so many people pay with credit cards it’s hard to avoid,” says Stein. “We definitely would like to use those dollars elsewhere.”