What’s All This Talk About Swipe Fees?

Consumers should care about credit card swipe fees, and here’s why.

August 30, 2022

By Jeff Lenard

ALEXANDRIA, Va.—In the 1983 movie National Lampoon’s Vacation, Clark Griswold takes the “Family Truckster” to the only auto repair shop in town for emergency repairs after an offroad misadventure. He asks the mechanic, “What’s the bill?” The mechanic replies, menacingly, “How much you got?”

That scene pretty much describes the current credit card market. There is no competition, so there is no reason to compete on price. You pay what Visa and Mastercard say you will pay—and they are fighting to keep it that way.

Wait, what? No competition, comrade? I thought, as the saying goes, that if you build a better mousetrap, the world will beat a path to your door. Especially in the United States of America.

Nope, that’s not how it works with credit card swipe fees.

In short, swipe fees, also known as interchange fees, are the 2%–3% that credit card companies charge retailers every time customers swipe their credit card to make a purchase. Visa and Mastercard set the swipe fees for the thousands of banks that issue their cards—and consumers foot the bill.

Here’s how it works: If you have a $50 fill-up at the pump, likely more than a dollar of that can be chalked up to swipe fees. If you’re a typical driver, you fill your gas tank at a convenience store about 50 times a year, which means you’re likely paying at least $50 annually in swipe fees at the pump alone. If you buy $100 worth of groceries, about $2.25 of what you pay could be taken in swipe fees. Now apply that to every other item you pay for with your credit card.

It gets worse this year with inflation at 40-year highs. Swipe fees are a percentage of the total price, so when inflation spikes, so do swipe fees. When card usage increases, swipe fees take a bigger bite out of your wallet. Swipe fees have more than doubled over the past decade and now top $137 billion annually. By comparison, they were only $16 billion in 2001. Plug that through an online inflation calculator and that $16 billion in in 2001 is $25 billion in 2022 dollars. Yet, swipe fees today are $137 billion.

Read more about swipe fees and why Americans need to care about them in this month’s Convenience Corner blog post.