Credit card swipe fees could drive up families’ Fourth of July costs a half billion dollars

Photo (c) Javier Zayas Photography - Getty Images

Is there a way consumers can save? Yes, but not everywhere.

Red, white, and whew! Heading into the Fourth of July, consumers should be prepared for their wallets to get a little lighter by the time the weekend comes to a close.

“Swipe” fees – those charges that banks and card networks force merchants to pay to process credit card transactions -- could drive up consumers’ cost of celebrating the Fourth of July by more than $500 million this year, the Merchants Payments Coalition (MPC) claims.

In the past, merchants have absorbed those credit card fees but increasingly, they are passing them on to consumers.

It is difficult to calculate a precise total, but MPC estimates higher costs could cost $4 per U.S. household or the equivalent of a package of hot dogs or a box of sparklers. That’s just the start.

For families hitting the road over the Fourth, either in their own car or in a rental, they can expect to pay their share of the 7-10 cents per gallon that fuel merchants have to pay in swipe fees.  making every fill-up more expensive. 

If you’re flying anywhere, that average $300 domestic airfare will include close to $7 in swipe fees, but international travelers will be paying more than four times that. 

And we’re not even close to back-to-school time when swipe fees are expected to add an extra $26 per student to a family’s school supply list. Then, there are the holidays.

Add all of those up – and every other little nickel and dime we spend – and we’re looking at over $1,000 a year that the average family will pay for things to offset the swipe fees that merchants are forced to pay.

Is there any way to stop this runaway train?

Swipe fees don’t get much ink, but merchants paid $126.4 billion in processing fees for credit cards in 2022, a 20% increase. Most of those came from Visa and Mastercard, the companies dominating the market, where fees increased 21% to $93.2 billion.

The big chains can handle the hit, but the little guy like the mom-and-pop restaurants are the most vulnerable to high credit card swipe fees because they pay the highest rates and have the least leverage to fight back or cut a good deal.

But, the good news/bad news spin on that is that small merchants and restaurants that might add a surcharge for credit card use will often offer their customers a cash discount.

However, these retailers have to do this on the sly because card industry rules prevent cash discounts. Still, it’s worth carrying some extra cash and asking if you’ll get a discount if you keep your credit card in your pocket.

Don’t give up hope, though. A bipartisan group of U.S. lawmakers is trying to rein in these fees with the Credit Card Competition Act.

If they can get the legislation all the way through the maze, it would be a major victory for consumers as well as small businesses.

It could end Visa and Mastercard's monopoly over how transactions on credit cards issued under their brands are processed. It could also require that cards from banks with $100 billion or more in assets be enabled to be processed over at least two unaffiliated networks – Visa or Mastercard plus a competitor like NYCE, Star or Shazam, or even American Express or Discover.

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