News Column

Bank Shot: How Merchants Find Themselves in a Game Without Refs or Rules When It Comes to Credit Cards

June 5, 2014

WASHINGTON--(BUSINESS WIRE)-- For the highrollers, there was still a pair of tickets available earlier this week right on the floor for today’s opening game of the NBA finals, at $19,000each. And that’s not even at center court.

Buy them with a credit card and the bank will gouge the seller as much as 4 percent to process the transaction. That’s more than $1,500 on a transaction that costs the bank a few cents to handle.

Even on the relatively “cheap” seats -- $267 for a balcony seat for today’s game between the Miami Heat and San Antonio Spurs – a 4-percent swipe fee would be almost $11, almost all of it profit for the bank.

High-rollers won’t mind, but these exorbitant “swipe fees” raises prices on everything for the rest of us, ordinary people who may be struggling to buy gas or groceries in this uncertain economy. The fees also exploit and hurt merchants, (especially small ones), a big chunk of our economy, and obstruct economic growth.

Americans thought the 2008 financial crisis would end bank misbehavior after Congress passed reforms and regulators assessed fines of billions of dollars for scams like peddling subprime mortgages and illegally foreclosing on homeowners.

But the fact is that banks – thanks to the dominance over the card market of just two companies, Visa and MasterCard – still continue to prey on merchants through these onerous and unfair swipe fees.

Visa and MasterCard fix fees for their banks, which makes the market uncompetitive and distorts what should be a free market, like the rest of our economic system. Instead, these fees are growing faster than retailers’ profits in some cases – for instance, convenience stores that sell gas pay billions more every year to the banks than they keep in profit.

Another astonishing fact few people know outside the retail and banking industries: Without a competitive market, these fees have grown to become many retailers’ second-highest operating cost after labor. That is a huge burden, especially for the small merchant.

And don’t kid yourself: Just because you’ve never heard of these fees doesn’t mean they don’t affect you in myriad ways. A study commissioned by the Merchants Payments Coalition found that just introducing a modest measure of fairness to the debit-card business saved consumers almost $6 billion during the reform’s first year in effect and created more than 37,000 jobs.

If Congress had also introduced the same level of fairness to credit cards, consumers would have saved another $15 billion and retailers would have created almost 100,000 more jobs.

So when the Spurs take the court against the Heat today in San Antonio’s AT&T Center, think for a minute about those swipe fees, and their crushing burden on merchants. Whichever team wins, merchants will continue to lose in a game without referees or fair rules, one that the banks and credit-card companies utterly control.

For more information about unfair credit-card 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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