Most consumers don’t know it, but the average family pays hundreds of dollars a year because of hidden “swipe” fees banks charge merchants to process credit card transactions.
These fees aren’t disclosed on monthly credit card bills, and credit card company rules keep merchants from showing them on receipts. But they are most merchants’ second-highest operating cost after labor and drive up prices, accounting for about $2 on a $100 purchase. U.S. swipe fees are the highest in the industrialized world and seven times the amount allowed in Europe. The total has soared from under $20 billion a year two decades ago to nearly $100 billion and is major source of big banks’ huge profits.
Such an astronomical increase has been possible because of lack of competition. Rather than competing to process transactions at the lowest possible cost, virtually all banks that issue Visa and Mastercard credit cards charge the same rates centrally set by the two card giants. Furthermore, transactions with Visa credit cards can only be processed over the Visa network and transactions with Mastercard can only be processed over its network, unlike debit card transactions that can be processed over a dozen competing networks.
Multiple lawsuits and legal experts have said the lack of competition over the fees is a violation of federal antitrust law, the same as if grocers colluded to set the price of a gallon of milk or retailers agreed on the price of a T-shirt.
Needless to say, the banks and card networks want to protect the status quo. They have made repeated false and misleading claims, misrepresenting research and reports to safeguard their profits.
As a North Dakotan who knows the impact of these outrageous fees both as a consumer and a business owner, I believe it is time for Congress and the nation’s banking regulators to do something about this growing abuse.
Deanne Schatz is a representative of Petro Shopping Center in Fargo.
This letter does not necessarily reflect the opinion of The Forum's editorial board nor Forum ownership.