Credit Card 'Swipe' Fees Could Cost Consumers $20 Billion During Holiday Season Shopping

Contact: J. Craig Shearman
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Fees for Average Family Equal the Cost of a Barbie Doll, Lego Set or Holiday Ham

WASHINGTON, December 11, 2023 – Rising swipe fees banks charge merchants to process credit card transactions could cost consumers nearly $20 billion in higher prices – and maybe more – this holiday season, the Merchants Payments Coalition said today.

“After a year of high inflation, the last thing consumers need is high credit card fees that make holiday purchases from toys to Christmas trees more expensive,” MPC Executive Committee member and National Retail Federation Chief Administrative Officer and General Counsel Stephanie Martz said. “Swipe fees charged by banks drive up the cost of everything Americans buy during the holidays and only Scrooge would think that’s fair as many families struggle to put smiles on children’s faces. It’s time to put Santa ahead of the Grinch and pass legislation to bring these fees under control.”

Consumers are expected to spend an average $875 during the November-December holiday season for a total as high as $966.6 billion, according to NRF. Based on the average 2.24 percent rate for Visa and Mastercard, that would include about $20 in swipe fees for the average family – enough to buy a Barbie doll or Lego set, the two most-wanted holiday toys, or a ham or turkey for a holiday dinner.

Total figures are difficult to calculate because not all purchases are paid for with credit cards. But independent payments consulting firm CMSPI estimates that about 80 percent of holiday purchases will be made with credit or debit cards or digital wallets this year and that swipe fees will total at least $18.6 billion even after allowing for cash purchases. That’s up from $18 billion last year. If all purchases were made with cards, swipe fees would total $26 billion, according to CMSPI.

With either figure, swipe fees are most merchants’ highest operating cost after labor throughout the year and too much to absorb, driving up prices they have to charge their customers. Swipe fees are up 50 percent since the pandemic and hit a record $160.7 billion last year, costing the average family over $1,000 a year.

The holiday impact of swipe fees comes as the Credit Card Competition Act – sponsored by Senators Richard Durbin, D-Ill.; Roger Marshall, R-Kan.; Peter Welch, D-Vt., and J.D. Vance, R-Ohio, along with Representatives Lance Gooden, R-Texas; Zoe Lofgren, D-Calif.; Thomas Tiffany, R-Wis., and Jefferson Van Drew, R-N.J. – is pending in Congress.

The bill would end Visa and Mastercard’s longstanding monopoly over how transactions on cards issued under their brands are routed for processing. Instead, cards from the nation’s largest banks would be required to be able to be routed over at least one competing network like NYCE, Star or Shazam in addition to Visa or Mastercard’s networks. Banks would choose which networks to enable but merchants would then choose which to use, meaning networks would have to compete over fees, security and service, saving merchants and their customers an estimated $15 billion a year.

Under the legislation, rewards points would not be affected, consumers would still use the same cards, and security would be improved because the Federal Reserve says the competing networks have one-eighth the fraud rate of Visa and Mastercard. Financial institutions with less than $100 billion in assets – including all community banks and all but one credit union – would be exempt.

About MPC
The Merchants Payments Coalition represents retailers, supermarkets, convenience stores, gasoline stations, online merchants and others fighting for a more competitive and transparent card system that is fair to consumers and merchants. Follow MPC on Twitter, Facebook or LinkedIn for the latest on swipe fees.