Consumers likely don’t think twice about swiping their credit cards through a retail outlet scanner, but they should. As it turns out, “swipe” fees are one of the most lucrative fees for banks and card issuers — and one of the most costly for consumers.
For the record, credit card swipe fees, paid by both merchants and consumers, rack up $48 billion in fees annually, according to the National Retail Foundation.
The NRF paints the card swipe fee as harmful to consumers and retailers, and wants Washington to do something about it in the upcoming financial reform bill.
Says the NRF’s Senior Vice President and General Counsel, Mallory Duncan: “These fees drive up prices for the average family by hundreds of dollars every year and depress the ability of main street merchants to thrive and grow ... Financial services reform isn’t complete without swipe fee reform.”
Swipe fees — otherwise known as interchange fees — are fees charged by card issuers every time a card is swiped in a retail transaction. The NRF reports that the average fee is 2% of the transaction amount and that the $48 billion figure has tripled since 2001, when swipe fees accounted for only $16 billion. The foundation also says that the average U.S. household spent $427 in “higher prices” in 2008, compared to $159 in 2001.
While the CARD Act of 2009 did include a provision to study interchange fees, it didn’t take any direct action against swipe fees. But that could be changing.
On May 6, Senate Majority Whip Richard Durbin (D-Ill.) introduced a bill to require major card carriers like Visa (Stock Quote: V) and MasterCard (Stock Quote: MA) to negotiate card swipe fees with retailers, rather than impose fixed fees on them. The bill also includes a provision that would allow retailers to give discounts to consumers who use cash or a debit card to make a purchase — thus taking the swipe fee out of the equation.