Credit Card Fees Expected to Add $2.5B to BTS Supplies Cost: MPC

The “swipe fees” banks charge merchants to process credit card transactions will contribute nearly $2.5 billion to the cost of back-to-school (BTS) items families shop for this season, said the Merchants Payments Coalition Friday, citing data from the National Retail Federation. That's $20 in fees for the average family, it said.

“Swipe fees are a hidden tax on almost everything Americans buy regardless of whether they pay with cards or cash,” said National Association of Convenience Stores General Counsel Doug Kantor, a member of the MPC executive committee. Such fees have been “soaring for years” but are particularly burdensome during periods of high inflation, Kantor said. Because swipe fees are a percentage of the transaction amount, the fees automatically go up as prices go up, “driving inflation even higher,” Kantor said.

“Banks and card networks are raising prices on the backs of American schoolchildren trying to get an education,” Kantor said, urging Congress to “to require competition that would bring these fees under control.” MPC believes banks should set fees independently and should compete to offer the lowest fees, says the website.

Card companies and banks take more than 2% of the transaction every time a credit card is used to make a purchase, Kantor said. Swipe fees rose 25% last year to a record $137.8 billion for credit and debit cards combined and have more than doubled over the past decade, said MPC, saying the fees are most merchants’ highest operating cost after labor. Fees drive up prices for consumers, totaling about $900 a year for the average family, it said.

Credit card rules make discounts difficult, which MPC said means consumers pay more even if they pay with cash, debit cards or checks. Based on the average 2.22% rate for Visa and Mastercard -- "which control 80 percent of the credit card market and centrally price-fix the swipe fees charged by banks that issue their cards" -- that includes almost $20 in swipe fees for the average family. This season, K-12 spending is expected to total $13 billion for electronics ($289 million in swipe fees), while college spending is expected to be $18 billion for electronics ($400 million), said NRF.

Swipe fees set by Visa and Mastercard vary according to type of card, type of transaction and size of merchant, “with hundreds of combinations possible,” says the MPC website. “That makes them difficult to understand even for payments experts, and merchants don’t know how much they are paying for a particular transaction at the time of purchase.” Fees are hidden from consumers; merchants are unable to include them on receipts and banks don’t disclose them on monthly credit card bills, it said. “Making the fees transparent would be the first step toward bringing about competition.” Mastercard and Visa didn't comment.