Swipe Fees Add to Inflation for Americans Celebrating July 4

The fees merchants pay for accepting credit cards soared 25% last year to a record $137.8 billion.

June 30, 2022

WASHINGTON—Swipe fees will add hundreds of millions of dollars to the cost of everything from food to fireworks as Americans struggling amid rampant inflation celebrate Independence Day this year, according to the Merchants Payments Coalition, of which NACS is an executive committee member.

“Consumers are eager to celebrate this Fourth of July, but credit card fees are adding to the cost of the holiday,” MPC executive committee member and NACS General Counsel Doug Kantor said. “Swipe fees are a percentage of the transaction, so they go up whenever prices go up and are a multiplier effect for inflation. The fees can be the equivalent of another box of sparklers or package of hot dogs and are money that disappears up in smoke more than anything Americans shoot into the sky or put on the grill. That’s a windfall for the card industry but less sparkle for consumers watching their wallets.”

Unknown to most consumers, banks and card companies take an average of just over 2% of the transaction every time a credit card is used to make a purchase. Swipe fees soared 25% last year to a record $137.8 billion for credit and debit cards combined and have more than doubled over the past decade. The fees are most merchants’ highest operating cost after labor and drive up the prices they charge consumers, working out to about $900 a year for the average family.

Americans plan to spend a record $84.12 on food for the Fourth on average, or $7.7 billion, according to the National Retail Federation. Based on the average 2.22% charged for Visa and Mastercard credit cards, that includes $1.87 in swipe fees for the average family and adds up to more than $170 million nationwide. Beer and wine will add an additional $1.4 billion to the tab, according to WalletHub— bringing about $22 million more in swipe fees.

Spending on fireworks totaled $2.4 billion last year, according to WalletHub, for an additional $53 million in swipe fees. Swipe fees account for about $2.55 of the $115 price of a “Fireworks Fiesta” package advertised by one dealer, or about half that on a more modest $55 “Big Shot Bag.”

For families making road trips, gasoline cost an average $4.88 a gallon this week, according to AAA. NACS says fuel retailers pay about 10 cents a gallon in swipe fees, adding a dollar to every 10-gallon fill-up. Rental cars can cost $500 a week or more, according to NerdWallet, with swipe fees representing about $11 of the cost.

Swipe fees remain one of the highest operating costs for convenience store retailers after labor, according to NACS State of the Industry data. In 2021, overall card fees paid by the convenience store industry were $13.5 billion, up 25.6% in 2021 versus 2020 ($10.7 billion), NACS SOI data indicate.

NACS’ Kantor testified at a Senate Judiciary Committee last month on behalf of the convenience store industry and the Merchants Payments Coalition.

In his opening statement, Kantor described the antitrust issues borne from Visa and Mastercard’s dominance of the credit card market. “This is an incredibly concentrated market, and none of [the banks] are setting their own prices. That doesn’t make any sense,” stated Kantor. “On top of that, Visa and Mastercard set the terms by which cards are accepted, which make sure to insulate those fees from any other competitive market pressure to make sure they can stay high.”

Durbin, Sen. Roger Marshall, (R-KS), Rep. Peter Welch, (D-VT) and Rep. Beth Van Duyne, (R-TX) wrote to Visa and Mastercard in April asking the card companies to withdraw the rate hike. The lawmakers said the increase would add to inflationary pressure and is the “last thing American families deserve right now.”