FOR IMMEDIATE RELEASE
Contact: J. Craig Shearman
(202) 257-3678 craig@shearmancommunications.com
WASHINGTON, August 29, 2024 – Fees that some merchants charge consumers to give them cash back on debit card transactions are the fault of banks setting high “swipe” fees charged to merchants and failing to provide services in small towns, the Merchants Payments Coalition said today.
“The CFPB’s report shows most merchants provide cash back to customers at no charge, and that means they are taking losses in order to provide this valuable service,” MPC Executive Committee member and National Association of Convenience Stores General Counsel Doug Kantor said. “Those who are charging a fee do so because they must pay exorbitant fees to credit card companies and banks. Most debit cards in small towns across America that have been abandoned by banks are not subject to federal regulations and charge merchants exorbitant swipe fees – much like credit cards that have no regulation at all. We should always be clear that the source of the problem with consumer fees on any card transaction is the banking and credit card industry.”
A Consumer Financial Protection Bureau report released this week said “Americans are paying tens of millions of dollars in fees to access their own money when getting ‘cash back’” when using a debit card or prepaid card. But the report said fees are charged by only three of the eight retail and grocery chains examined and CFPB Director Rohit Chopra acknowledged that merchants who provide cash back “are stepping in to fill a void left by the banking system.” Cash back at a merchant is often the only way to obtain cash locally in many small towns and is “the impact of the last bank branch closing or how services degraded after a bank merger,” Chopra said.
“Swipe fees go up with every extra dollar in a transaction, so retailers have to pay higher fees if a customer wants cash back,” Kantor said.
Large banks with at least $10 billion in assets are limited by federal law to charging merchants 22 cents plus 0.05% of the total for a debit card transaction. But small local banks are exempt and can charge 2-3%, almost the same as the swipe fee for a credit card, Kantor said. That means a merchant can pay a fee as high as $3 for every $100 given as cash back.
By contrast, the CFPB said merchants typically charge between 50 cents and $1 for cash back. According to Bankrate, banks charge consumers record fees for getting their own money at ATMs – $4.77 on average for an out-of-network withdrawal.
Credit and debit card swipe fees that banks and credit card networks charge merchants to process transactions have more than doubled over the past decade, reaching a record $172 billion last year, according to the Nilson Report. The fees are most merchants’ highest cost after labor and drive up prices for the average family by over $1,100 a year.
The CFPB report comes as Congress is considering the Credit Card Competition Act, which is aimed at reducing credit card swipe fees. Visa and Mastercard 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 $16 billion a year.
About MPC
The Merchants Payments Coalition represents retailers, supermarkets, convenience stores, gasoline stations, online merchants, hotels 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.