WASHINGTON – Retail sales rose in the third quarter, obviously good news for the economy since retail is such a big chunk of all economic activity. But it’s too bad retailers won’t fully benefit thanks to the banks gouging them on credit-card swipe fees.

The U.S. Commerce Department reported that sales rose more than 4% over last year, with an especially strong showing in September after a slow August. But retailers aren’t celebrating yet, says the Merchants Payments Coalition (MPC). That’s because banks will shave as much as 4% off merchants’ sales for processing credit-card transactions, or $4 for every $100 worth of gas or groceries a customer buys by swiping a card. Yet each transaction costs the banks only a few cents to process, for profits on these “swipe fees” of more than 10,000%.

According to MPC, the market is essentially rigged for the credit card companies. Visa and MasterCard control the market and each sets the fees banks charge merchants at exorbitant rates in order to draw banks to the Visa or MasterCard brand.

That’s great for banks, but bad for merchants and their customers. Because retail is a competitive market and retailers subsist on paper-thin profit margins of a percent or two, retailers must pass along at least some of these exorbitant fees to customers in higher prices. That hurts consumers, and in turn merchants — especially smaller ones — and ultimately hampers the entire economy.

Swipe fees have swollen to the point where they are now many merchants’ second-largest operating cost after labor (and higher than rent). Many merchants pay more in swipe fees than they earn in profits. In Europe, where regulators have made markets more competitive, swipe fees are seven or eight times lower than they are here in the United States.