June 26, 2023
WASHINGTON – “Swipe” fees banks and card networks charge to process credit card transactions could drive up consumers’ cost of celebrating the Fourth of July by more than $500 million this year, the Merchants Payments Coalition said today.
“Fourth of July is the most American of our national holidays but there is nothing American about fees that are set without competition,” MPC Executive Committee member and National Association of Convenience Stores General Counsel Doug Kantor said. “Americans celebrating Independence Day will pay more for everything from sparklers to hot dogs because of swipe fees that have skyrocketed higher than the biggest fireworks display. Lack of competition is why these fees continue to rise and why consumers are paying more. It’s time for Congress to bring swipe fees under control and make the card industry compete the same as small businesses do every day. Competition is the American way and there’s no better time to remember that than the Fourth of July.”
While a precise total is difficult to calculate, MPC estimates that higher costs from swipe fees on food, alcohol, fireworks and flights could total $513 million, or about $4 per U.S. household and the equivalent of a package of Fourth of July hot dogs or a box of sparklers.
Americans plan to spend an average $93.34 per household on food for the Fourth this year, or a record $9.5 billion, according to the National Retail Federation. Based on the average 2.24 percent swipe fee for Visa and Mastercard credit cards, that includes $2.09 in swipe fees for the average family and adds up to $212.8 million in swipe fees nationwide. Alcohol to go with the food totaled $3.9 billion last year, according to NielsenIQ, adding another $87.4 million in swipe fees if the number is equaled this year.
Spending on fireworks totaled $2.3 billion last year, according to the American Pyrotechnics Association, for another $51.5 million in swipe fees. Swipe fees account for about $4.50 of the $200 price of an “All American” assortment advertised by one dealer, or about $2.50 on a $110 “Red, White and Boom!” package from another dealer.
For families who will drive, gasoline is averaging $3.58 a gallon for regular, according to AAA. NACS says fuel merchants can pay 7-10 cents a gallon in swipe fees, making every fill-up more expensive. Rental cars can cost between $500 and $600 a week or more, according to NerdWallet, with swipe fees representing up to $13 of the cost.
An estimated 24 million people are expected to fly over the July 4 weekend and will pay an average $300 per domestic round trip ticket, according to travel app provider Hopper. That amounts to $6.72 per ticket in swipe fees, or $161.3 million in swipe fees on $7.2 billion in total airfare. International travelers will pay an average $1,371 per roundtrip ticket to Europe, including $30 in swipe fees. Hopper says hotel rooms will average $197 per night, which would mean a swipe fee of $4.41.
The estimates come as Congress is considering the Credit Card Competition Act, which was reintroduced June 7 by Senators Richard Durbin, D-Ill.; Roger Marshall, R-Kan.; Peter Welch, D-Vt., and J.D. Vance, R-Ohio, and by Representatives Lance Gooden, R-Texas; Zoe Lofgren, D-Calif.; Thomas Tiffany, R-Wis., and Jefferson Van Drew, R-N.J.
Visa and Mastercard – which control 80 percent of the market – currently price-fix swipe fees charged by banks that issue cards under their brands, and also block transactions from being processed over other networks that could do the job with lower fees and better security. The legislation would require banks with at least $100 billion in assets to enable cards they issue to be processed over at least two unaffiliated networks – Visa or Mastercard plus a competitor like NYCE, Star or Shazam. That would make networks compete over fees, security and service and is expected to save merchants and their customers $15 billion a year.
Credit and debit card swipe fees have more than doubled over the past decade and soared $22 billion last year to a record $160.7 billion. The fees are most merchants’ highest operating cost after labor and drive up prices by more than $1,000 a year for the average family.
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.