Merchants Say Credit Card 'Swipe' Fees Will Add $2.5 Billion to Back-to-School Spending

Contact: J. Craig Shearman
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Swipe Fees for Average Family Equal the Cost of a Backpack or Lunchbox

WASHINGTON, July 15, 2023 – “Swipe” fees banks charge merchants to process credit card transactions will contribute an estimated $2.5 billion to the cost of everything from crayons to computers as American families hit with rising inflation send their children back to school and college this year, the Merchants Payments Coalition said today. That amounts to almost $20 in swipe fees for the average family.

“Swipe fees are a hidden tax on almost everything Americans buy regardless of whether they pay with cards or cash,” MPC Executive Committee member and National Association of Convenience Stores General Counsel Doug Kantor said. “These fees have been soaring for years but are particularly burdensome when families are hit with the high inflation that has weakened buying power this year. When a low-income family struggling to make ends meet pays $20 more because of swipe fees, that can make the difference in being able to replace a worn-out backpack or buy a warm winter coat. Because swipe fees are a percentage of the transaction amount, these fees automatically go up as prices go up, driving inflation even higher. Banks and card networks are raising prices on the backs of American schoolchildren trying to get an education. That isn’t right, and it’s time for Congress to require competition that would bring these fees under control.”

Banks and card companies take more than 2 percent of the transaction every time a credit card is used to make a purchase. Swipe fees soared 25 percent last year to a record $137.8 billion for credit and debit cards combined and have more than doubled over the past decade. They are most merchants’ highest operating cost after labor and drive up prices for consumers, working out to about $900 a year for the average family. Since credit card rules make discounts difficult, consumers pay more even if they pay with cash, debit cards or checks.

Families plan to spend an average $864 on clothing, electronics and other school supplies for K-12 students this year, or $37 billion, according to the National Retail Federation. Based on the average 2.22 percent 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 and adds up to $821 million nationwide.

For families with students in college, spending is expected to average $1,199, or $74 billion, resulting in almost $27 in swipe fees per family or $1.6 billion nationwide. Swipe fees on K-12 and college spending combined could total almost $2.5 billion.

The average school backpack costs about $30, resulting in about 65 cents in swipe fees, and lunchboxes can be around $20, or about 45 cents in swipe fees. Even though swipe fees might appear small on an individual item, the nickels and dimes add up: Swipe fees account for almost $2 of the $88 price of a school-recommended list of pencils, crayons, paper and similar supplies for a first-grader being advertised by one national office supply retailer.

As students get older, costs – and swipe fees – go up. For a 12th grade high school student, supplies from the same retailer total $255, or over $5 in swipe fees. The $120 price of a graphing calculator commonly required for high school math and science classes includes swipe fees of over $2.50 while a $500 laptop for a college student includes about $11 for swipe fees. A more sophisticated $1,000 computer would include over $20 in swipe fees.

NRF says K-12 spending is expected to total $13 billion for electronics ($289 million in swipe fees), $11 billion for clothing ($244 million) and $7 billion for shoes ($155 million). College spending is expected to come to $18 billion for electronics ($400 million)  and $10 billion each for dorm/apartment furnishings ($222 million) and clothing ($222 million).

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.