News Column

Outrageous Credit-Card “Swipe Fees” Hurt Consumers on Father’s Day and Every Day

June 11, 2014

WASHINGTON--(BUSINESS WIRE)-- The forecasters say there may be fewer socks, ties and greeting cards sold for Father’s Day Sunday, but one thing will remain the same: The banks will continue to gouge retailers when those customers use a credit card, pushing up prices for all consumers.

Americans will spend $12.5 billion this year on Dad, according to a survey for the National Retail Federation, down from $13.3 billion last year. That makes Father’s Day the smallest of the gift-giving holidays.

Still, those numbers are nothing to sneeze at. And since banks charge as much as 4 percent in “swipe fees” to process credit-card transactions, which cost the banks only a few pennies a transaction, they’re the ones actually cleaning up on this holiday spending.

Consider: You buy Dad a $50 tie using a credit card. The bank takes as much as a $2 cut, even though the transaction costs it only a few pennies to handle.

In many cases, banks are making more on a credit-card sale than the merchants. Consider convenience stores that sell gas: They paid $11 billion in card fees last year, more than the $7 billion they kept in pre-tax profits.

These unconscionable fees are now many retailers’ second-largest operating cost, after labor.

Even with the economy improving, consumers have remained tight-fisted during the holidays so far this year, the National Retail Federation says. That’s unfortunate, because consumer spending is a huge chunk of our economy.

Also disheartening: The swipe fees banks impose without competition on retailers raise prices for consumers (even when they don’t use credit or debit cards), hurt retailers – especially small ones – and by curtailing growth, hurt the economy too.

Unlike retailing, where merchants compete head-to-head and competition is so intense that profit margins are usually tiny, Visa and MasterCard fix swipe fees for their member banks so they don’t have to compete. This kind of abuse is certainly not what we expect from our free-market economic system.

Consider on the other hand how reform benefits consumers: A prominent economist found that in its first year in effect, 2012, a measure that modestly reformed debit-card swipe fees saved consumers nearly $6 billion and created 37,000 new jobs.

Swipe fees are a corner of our economy where the market has gotten seriously out of kilter, and where banks continue to load outrageous fees on the backs of retailers already struggling with a sluggish economy and thin profit margins.

So this Father’s Day, as Dad unwraps his new socks and opens his card, spare a thought for the merchant who sold you these things. Her Father’s Day will be much the same as last year – the banks will still have their hands in her pockets, and her fees will continue to rise.

For more information about unfair swipe fees, go to the Merchants Payments Coalition website:

The Merchants Payments Coalition - - is a group of retailers, supermarkets, drug stores, convenience stores, fuel stations, on-line merchants and other businesses who are fighting against unfair credit card fees and fighting for a more competitive and transparent card system that works better for consumers and merchants alike. The coalition's member associations collectively represent about 2.7 million stores with approximately 50 million employees.

Merchants Payments Coalition

Michael Flagg, 202-253-4164

Source: Merchants Payments Coalition

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Source: Business Wire

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