Swipe Fees Could Cost Consumers Almost $600 Million This Valentine’s Day

Consumers will pay an additional $4.28 on average in swipe fees.

February 01, 2023

WASHINGTON—Swipe fees that banks charge merchants to process credit and debit card transactions could potentially cost consumers more than $500 million in higher prices for everything from cards and candy to roses and rings this Valentine’s Day, according to the Merchants Payments Coalition (MPC). NACS is a founding member of the MPC.

“There’s nothing romantic about swipe fees,” said Doug Kantor, NACS general counsel and MPC executive committee member. “Swipe fees can mean fewer flowers in the bouquet, fewer chocolates in the box and fewer carats in the ring because they drive up the cost of everything Americans buy. For couples celebrating on Valentine’s Day, that means they may have to settle for less than they could have if these fees weren’t out of control.”

Consumers are expected to spend an average of $193 on Valentine’s Day items such as candy, flowers, jewelry, greeting cards, clothing and evenings out this year for a total of $25.9 billion, according to the National Retail Federation. Based on the average 2.22% rate for Visa and Mastercard, that total would include $4.28 in swipe fees and would add up to $575 million nationwide if all purchases were made with credit cards.

Everything costs more on Valentine’s Day, giving banks and card networks a lucrative bonus as they take their percentage, says MPC. A $100 bouquet of roses with vase ordered online for delivery and paid for by credit card can include close to $2.75 in swipe fees by the time swipe fees on shipping and sales tax are included. Swipe fees on a $60 box of chocolates amount to about $1.30. A $200 prix fixe dinner for two can include over $5 for swipe fees on the meal and tip, and a $50 bottle of wine or champagne adds another $1 in swipe fees.

Couples who get engaged on the most romantic day of the year face a particularly steep swipe fee. Brides magazine says couples spent an average of $3,756 on an engagement ring in 2020. That means a swipe fee of $83.

Exact figures are difficult to calculate because not all purchases are paid for with credit cards. But about 75% of in-person purchases are made with plastic, according to the U.S. Federal Reserve, and card industry rules make cash discounts difficult for those who don’t pay with plastic. For those buying online, virtually all purchases are paid for by debit or credit card, and swipe fees are even higher than in-store.

Credit and debit card swipe fees—which doubled over the past decade and soared 25% to a record $137.8 billion in 2021—are most merchants’ highest operating cost after labor. The fees are far too high to absorb, especially for small merchants, and instead are passed on to consumers, driving up prices by nearly $1,000 a year for the average family.

The Credit Card Competition Act—introduced last year by Sen. Richard Durbin, D-Ill., Sen. Roger Marshall, R-Kan., Rep. Peter Welch, D-Vt. (now a senator) and Rep. Lance Gooden, R-Texas—is awaiting reintroduction in the new session of Congress.

“Cupid can’t cure credit cards, but Congress can,” Kantor said. “Congress needs to make the card industry compete the same as any other industry and keep swipe fees from taking the romance out of Valentine’s Day.”

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 have the option 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.

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.