Swipe Fees Impact Consumer Spending

U.S. households paid $724 last year in swipe fees, even if they didn’t use credit cards.

December 07, 2021

Swiping Credit Card

ALEXANDRIA, Va.—Consumers are bearing the costs of swipe fees, reports The Balance. The average U.S. household paid $724 a year for credit card fees in 2020, whether or not they used cards, according to an analysis by CMSPI, an independent global payments consultancy, which is $261 more than in 2012.

Retailers are being charged 2.2% on average for a customer to pay with a credit card, and retailers pass along about 70% of that cost to consumers in the form of higher prices, said Callum Godwin, chief economist at CMSPI.

According to The Balance, the average household cost for credit card swipe fees transfers wealth from low-income households to wealthier households. Higher-income households are more likely to have better credit and the ability to take advantage of credit card rewards programs. Lower-income families are less likely to benefit that way, but still have to pay the higher prices that merchants charge because of credit card fees.

CMSPI says that lack of competition among big payment companies keeps swipe fees high. U.S. merchants pay the highest swipe fees in the industrialized world, more than seven times the 0.3% for credit cards and 0.2% for debit cards allowed in Europe. Amazon said that starting January 19, 2022, it won’t accept Visa credit cards issued in the United Kingdom, citing high swipe fees.

Credit card swipe fees remain one of the highest operating costs for convenience store retailers after labor, according to NACS State of the Industry data. Consumer preferences for more touch-free transactions and the coin circulation challenge in summer 2020 led to record debit and credit card usage at convenience stores. In 2020, 74.6% of all transactions were paid by plastic, and overall card fees paid by the convenience store industry were $10.7 billion, NACS SOI data indicate.

Last month, The Merchants Payments Coalition called on the U.S. Federal Trade Commission to investigate the credit card industry, saying swipe fees charged to process transactions have contributed to increases in gasoline prices.

“Card fees are up nearly 20% for gasoline retailers this year,” said Doug Kantor, NACS general counsel and MPC executive committee member. “The card industry is making more right now from gas sales than local gas station owners. That’s not right.”

In September, NACS asked the FTC to investigate anticompetitive tactics used by Visa and Mastercard, including rules that keep independent card processing networks like Star, NYCE or Shazam from processing credit card transactions.