Swipe Fees Could Cost Consumers $20 Billion This Holiday Season

Each consumer will pay an additional $18.50 on average in swipe fees, based on the average swipe fee of 2.22%.

December 20, 2022

WASHINGTON—Rising swipe fees could potentially cost consumers over $20 billion in higher prices for everything from dreidels to Christmas trees this holiday season, according to the Merchants Payments Coalition. NACS is a founding member of the MPC.

“Everyone knows about Scrooge and the Grinch, but the hidden villains of the holiday season are Visa, Mastercard and the megabanks that issue credit cards under their brands,” said Doug Kantor, NACS general counsel and MPC executive committee member. “Swipe fees drive up the cost of everything Americans buy and can mean fewer toys under the tree for families trying to make ends meet amid the highest inflation we’ve seen in decades. That’s not fair and it’s time for Congress to do something about it.”

Consumers are expected to spend an average $833 during the holiday season for a total of at least $942.6 billion, according to the National Retail Federation’s (NRF) annual forecast. Based on the average 2.22% rate for Visa and Mastercard, that would include about $18.50 in swipe fees for the average family and would add up to $20.9 billion nationwide if all purchases were made with credit cards.

The $18.50 figure is enough to buy a Barbie Doll or LEGO set, the two most-wanted holiday toys cited in NRF’s survey. A TV commercial unveiled last week by MPC and NACS said consumers could buy a new winter coat, pair of headphones or a soccer ball with the savings if swipe fees were subject to competition rather than centrally set by Visa and Mastercard.

Exact figures are difficult to calculate because not all purchases are paid for with credit cards. But 81% of consumers plan to pay with plastic this year, and card industry rules make cash discounts difficult for those who don’t. In addition, premium cards can carry swipe fees of 3% or more, costing the average family about $25 in hidden fees during the holidays.

Online purchases, which are almost always made by card, are forecast to reach at least $262.8 billion, which would result in $5.8 billion in swipe fees if all purchases were made with credit cards.

Credit and debit card swipe fees—which have doubled over the past decade and soared 24% to a record $137.8 billion last year—are most merchants’ highest operating cost after labor. The fees are far too high to absorb, especially for small merchants, and drive up consumer prices by an estimated $900 a year for the average family.

The holiday impact of swipe fees comes as the Credit Card Competition Act—sponsored by Senators Richard Durbin, D-Ill., and Roger Marshall, R-Kan., and Representatives Peter Welch, D-Vt., and Lance Gooden, R-Texas—is pending in Congress.

The legislation would end Visa and Mastercard’s longstanding monopoly over how transactions on cards issued under their brands are routed for processing. Instead, cards from the nation’s largest banks would be required to be able to be routed over at least one competing network in addition to Visa or Mastercard’s networks. Banks would choose which networks to enable but merchants would then choose which to use, meaning networks would have to compete over fees, security and service, saving merchants and their customers an estimated $11 billion a year. Rewards points would not be affected, security would be improved, consumers would still use the same cards and community banks and small credit unions would be exempt.

Convenience store swipe fees were $14 billion in 2021, a 26% increase over the year prior and were about 33% higher than that over the first half of 2022.

In May 2022, Kantor testified before the U.S. Senate Committee on the Judiciary, underscoring the exorbitant swipe fees levied on retailers and how those fees are the direct result of price-fixing by Visa and Mastercard.

NACS is asking its members to contact their members of Congress and ask them to co-sponsor the Credit Card Competition Act, S. 4674 and H.R. 8874, using the NACS Grassroots Portal. Congress must act to ensure that there is price competition on swipe fees and enable the U.S. to have an innovative and efficient credit card market.