Swipe Fees Continue to Hurt Merchants, Consumers

The average family spends $700 a year on swipe fees, which are fueling inflation.

April 26, 2022

Woman paying via credit card

ALEXANDRIA, Va.—Credit card swipe fees are still a battle between retailers and the credit card company that impose billions in fees, reports USA Today.

On average, the American family spends approximately $700 a year because of swipe fees. Since credit card swipe fees are levied as percentage of the total transaction cost, they serve as an inflation multiplier as prices rise.

These fees “get factored into the cost of everything consumers buy,” Doug Kantor, NACS’ general counsel, told USA Today. “This is bad for merchants, bad for consumers and bad for inflation.”

Total processing fees for all types and brands of cards were $137.8 billion in 2021, according to a Nilson Report, compared with $110.3 billion in 2020 and $65.1 billion in 2011. For Visa and Mastercard credit cards alone, 2021 was $77.48 billion, 2020 was $61.63 billion and 2011 was $27.7 billion.

For convenience store retailers, card fees were up 25.6% in 2021, hitting $13.5 billion, versus $10.7 billion in 2020.

“Merchants and American consumers are not fooled by such bait-and-switches,” states a bipartisan letter to Visa and Mastercard signed by Sen. Dick Durbin, (D-Illinois), Sen. Roger Marshall (R-Kansas); Rep. Peter Welch (D-Vermont) and Rep. Beth Van Duyne (R-Texas). “Your profits are already high enough and any further fee increase is simply taking advantage of vulnerable Americans.”

Visa and Mastercard last year postponed an estimated $1.2 billion in swipe fee increases that were set to take effect in April 2021 after Durbin and Welch said they were ill-timed as the economy was struggling to recover from the pandemic. The card networks said the increases would take effect this month instead.

Visa responded to the letter, saying that 838,000 small U.S. businesses would benefit from a drop in fees and that monies from increases would go toward making card transactions more secure.

The letter said that Visa and Mastercard could “play a constructive role” in reducing inflation by reducing swipe fees. Because swipe fees are a percentage of each transaction, the amount collected by credit card companies rises with inflation. At current rates, card networks and banks stand to see nearly 9% more swipe fee revenue this year even if rates stay the same, says the Merchants Payments Coalition, of which NACS is a founding member.

Visa and Mastercard have said that swipe fees help the companies cover costs related to innovation and preventing fraud.

"As more commerce moved online during the pandemic, so did fraud," Visa said in its response.

The letter said Visa and Mastercard often announce decreases in some swipe fees only to raise others, resulting in a net increase. Mastercard had said that it’s lowering costs for all merchants with transactions below $5, and Visa says it’s cutting its rates by 10% for more than 90% of small businesses; however, only those with $250,000 or less in credit card volume will benefit from Visa’s rate reductions.

At an average of 2.22% of the transaction amount, Visa and Mastercard’s U.S. credit card swipe fees are the highest in the industrialized world.