WASHINGTON - For
merchants, accepting credit cards has always brought with it a sense of mystery
€" they never know what swipe fees they will have to pay for processing that
transaction. The Merchants Payments Coalition (MPC) has unveiled a new
document that shows how MasterCard and Visa have worked with big banks
on price-fixing those fees.
Even though banks set
their own prices on every other fee and rate they charge, they each agree to charge
the same swipe fees in concert with Visa or MasterCard. The Merchants Payments
Coalition (MPC) said that while banks complain that merchants might show
consumers how large these fees are (and decry it as surcharging), the financial
firms continue to hide their swipe fee price-fixing scheme.
"Visa and MasterCard have
a stranglehold on the market. They set the fees in secret and banks all charge
the same thing rather than competing on price," said Doug Kantor, MPC counsel.
"If they price-fixed consumer fees they would probably go to jail, but because
the fee is charged to businesses and hidden they have managed to get away with
it."
Swipe fees, which have
tripled in the past decade, are the charges credit card companies set and banks
levy on merchants for accepting their credit cards. These fees are the
fastest-growing expense that merchants face (rising faster than health care
costs) and are merchants€™ second-highest operating fee after labor costs. These
fees can be as high as 4% of the customer€™s bill €" the highest swipe fees paid
in any country in the industrialized world.
Merchants don€™t know what
the fee will be when a customer swipes a credit card until they get their bank
statement. There more than 240 different fees, depending upon the type of card
and the merchant accepting it. The banks that issue cards are Visa and
MasterCard's customers, not the consumers who use the cards. Under the current
system, Visa and MasterCard are motivated to keep banks happy, not consumers.
Merchants paid banks more
than $30 billion last year in credit card swipe fees €" money that could have
been used to create jobs and lower prices. If Congress would step in and stop
the price fixing, U.S. consumers could benefit from reduced swipe fees, as in
Europe where they are eight times lower.