WASHINGTON--(BUSINESS WIRE)--Americans will spend almost $20 billion for Mother’s Day, and they will probably buy many of those cards and flowers and brunches with a credit card, which means it’s the banks that will reap a windfall, not retailers and restaurants.
That’s because banks charge merchants an exorbitant “swipe” fee that is hidden from consumers every time those consumers use a card to buy something. The fee can be as much as 4 percent. On a $50 bouquet of flowers, that’s another $2 the merchant has to absorb, even though processing the transaction costs the bank merely a few pennies.
These percentages may seem small, but they add up to big numbers: On $20 billion, at 4 percent, it’s $80 million, and given the miniscule costs to the banks of processing those transactions, almost all of it would be profit.
That means higher prices for consumers, too, even if they don’t use a card to buy something.
Spending on Mother’s Day will actually fall a little this year, says the National Retail Federation, which commissioned a survey of 6,500 people. Those who told the researchers they would buy something for mom or take her out to eat predicted they would spend $163, down from $169 last year.
Although retail spending has risen overall this year, according to the federal Census Bureau, the retail federation says its surveys show consumer spending has fallen for several holidays this year. That’s another good reason not to load these unfair and onerous swipe fees on the backs of retailers, a big chunk of the economy whose financial health is crucial to the economy continuing to recover.
Merchants subsist in a highly competitive market, often on profit margins of a penny or two on the dollar. It’s unfair and counterproductive for banks to gouge them that much or more. (The powerful duopoly of MasterCard and Visa, which control this $50 billion market, each use their power to fix the fees their banks charge and this price-fixing has inflated the fees to outrageous levels.)
Retailers from grocery stores to gas stations, on the other hand, compete against each other in a free, transparent, unfettered market; so do florists and restaurants and every other retailer. Their prices are out there for customers to see.
But what their customers don’t see is that these merchants pay the highest swipe fees in the world, rising inexorably every year to the point where they are now many retailers’ second-highest operating cost, second only to labor, higher than rent and utilities.
And the customers also can’t see how this adds to prices and drags on economic growth.
This Mother’s Day, the best present retailers could get would be competition, fair play and reasonable prices in the swipe-fee business.
For more information about unfair credit-card swipe fees, go to the Merchants Payments Coalition website: http://www.unfaircreditcardfees.com/
The Merchants Payments Coalition - UnfairCreditCardFees.com - is a group of retailers, supermarkets, drug stores, convenience stores, fuel stations, on-line merchants and other businesses who are fighting against unfair credit card fees and fighting for a more competitive and transparent card system that works better for consumers and merchants alike. The coalition's member associations collectively represent about 2.7 million stores with approximately 50 million employees.