Swipe fees turn holiday returns into losses for small retailers

This is not about ending returns or shaming shoppers. Returns will always be part of retail. It is about understanding how the payment method affects the business on the other side of the counter.

Karen Harned, Guest columnist

Jan. 17, 2026, 6:30 a.m. CT

January is the cruelest month for small retailers. 

After the decorations are packed away, shop owners brace for the annual wave of returns: sweaters that didn’t fit, electronics that weren’t needed, gifts that looked better in December than they did in January. Returns are a normal part of retail, and most small businesses accept them as the cost of keeping customers happy.

What many shoppers don’t realize is that when a purchase is returned, the credit card swipe fee the business already paid is not refunded. That money is already gone.

Every time a customer pays with a credit card, banks and card networks take their cut, usually 2% to 4% of the sale, before the merchant ever sees a dime. When an item is returned, the business refunds the full purchase price, but the swipe fee stays with the credit card companies. The sale disappears, yet the fee the business had to pay remains.

Consider a $200 jacket bought in December and returned in January. The store may have paid $6 or more in swipe fees. When the customer gets their refund, the business is left holding the jacket and absorbing the fee. Multiply that by dozens or hundreds of returns, and January turns from a slow month into a costly one.

Most independent retailers operate on margins of less than 5% in a good year. A single swipe fee can equal their entire profit on a sale. When that sale is reversed, the business does not just break even. It loses money. 

This real, out-of-pocket loss for the business also has real impacts across the economy. That loss comes straight out of payroll, rent or inventory. In Oklahoma alone, more than 68,000 people work in these stores.

Large retailers can spread those losses across thousands of stores and billions in sales. Small businesses cannot.

Holiday returns and the ensuing swipe fee losses also help explain why more stores now shorten return windows, charge restocking fees or offer store credit instead of refunds. These policies are often blamed on retailers being stingy or unfriendly. In reality, they are just responses to a system that penalizes businesses for accommodating customers.

Swipe fees are designed to be invisible. They total more than $187 billion a year, or roughly $1,400 per household, hidden in the cost of nearly everything Americans buy. Inflation has only made the problem worse. As prices rise, credit card companies collect more money automatically, even though they provide no additional service.

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Consumers are not immune to this system either. Credit cards feel effortless, and rewards programs make them tempting. But research shows that rewards only actually benefit the highest earners. Once the cost of swipe fees baked into prices is taken into account, most households lose money overall.

For small businesses, however, the damage is immediate. 

There is an easy way for consumers to help.

When possible, consider using cash, a debit card or a direct bank transfer, especially at small businesses. Debit transactions typically carry much lower fees, and bank transfers often carry none at all. If there is a chance you might return an item, that choice matters even more. A cash, debit or bank-based transaction allows the return without leaving the business in the red.

This is not about ending returns or shaming shoppers. Returns will always be part of retail. It is about understanding how the payment method affects the business on the other side of the counter.

A system that charges businesses even when a sale is undone deserves more scrutiny. Until that changes, consumers can play a role by making small choices that have outsized effects.

Understanding how swipe fees work, especially during return season, is one step toward a fairer system for the local shops that anchor our communities. For more information on credit card swipe fees and how to avoid them, go to swipeflation.com.

Karen Harned is a small business advocate and former executive director of the National Federation of Independent Business Small Business Legal Center.