A credit card is placed into a credit card machine for processing payments on September 11, 2023 in La Puente, California. Credit card debt from US consumers is rising by billions of dollars amid higher inflation and interest rates, topping $1 trillion for the first time in history, according to the Federal Reserve Bank of New York. (Photo by Frederic J. BROWN / AFP) (Photo by FREDERIC J. BROWN/AFP via Getty Images)

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Tap the card, and walk out of the business establishment with goods purchased. That’s how it is in modern commerce.

Thanks to a payments system erected by credit card companies, and that spans the world, buying is incredibly easy for consumers. By extension, selling is incredibly easy for merchants.

Since the credit and debit card companies have taken on the burden of financing transactions, along with taxes and tips associated with any transaction, trips into and out of businesses are simple. Yet there’s more.

Transactions take place without any kind of reputational vetting of the individual receiving goods and services. Which means neither buyer nor seller need go to any kind of time-consuming and transaction-compromising lengths to make sure no one is getting ripped off.

Unfortunately, a payments’ system to mitigate the former chaos of transactions is being compromised in the state of Illinois. In their infinite wisdom, Illinois legislators crafted the Interchange Fee Prohibition Act (IFPA) for the ostensible purpose of saving Illinois businesses from the costs associated with credit and debit card transactions.

With the IFPA, credit and debit card companies can no longer include taxes and tips paid on transactions in the total amount charged businesses when a card is swiped. Instead, the 2% swipe fee can only apply to the goods purchased, not taxes and tips normally included in the total charge.

Readers can likely see how this unfortunate legislation found wings. In modern times, it’s popular to attach nobility to small businesses on Main Streets across the USA, all the while demonizing formerly small businesses that have become large.

Translated, Visa, MasterCard and other large credit card companies have been cast as the villain. Since the credit and debit card companies are large, they should be more than glad to finance taxes and tips for businesses, not to mention that they should be wiling to do all this while being forced to re-arrange complex systems in Illinois to enable a two-track charging system.

It beggars belief to think about what’s happening. Lost on Illinois legislators is that the card companies are large because they provide essential services for buyer and seller alike. See above. Only for the challenges of the IFPA to worsen the more we contemplate legislation that is scheduled to go into effect on July 1.

While small businesses will “enjoy” savings that can most often be measured in pennies per transaction, the cost for those same small businesses in the form of transactions slowed down by double swipes (first for goods purchased, next for taxes and tips) will multiply. And that’s assuming customers are willing to swipe twice. Assuming not, contemplate the headache for Illinois businesses with employees reliant on tips, but who will soon see their tipped income decline as customers decline multiple swipes to merely complete a transaction that was formerly so effortless.

What if, amid all the confusion, there’s a failure to transact to the letter of the IFPA law? Fines start at $1,000. Once again, all this hassle for a few cents savings per transaction for Illinois businesses that enjoy much greater overall income thanks to the convenience offered by card companies.

Writing about the law, Judge Virginia Kendall observed “There is no doubt that the IFPA presents complicated compliance challenges... There are difficult questions of staffing, resources, implementation timelines, enforcement, and practicality.” Well, yes. To say that chaos awaits Illinois businesses and their customers thanks to this most unfortunate of laws insults understatement.