WASHINGTON--(BUSINESS WIRE)--The average family with children from kindergarten through high school will lay out almost $700 this year on clothes, shoes, electronics and school supplies, and their banker will have his hand in their wallet as they spend.
Banks gouge merchants to process the transaction every time a customer swipes a credit card. Profit margins on these “swipe fees” can be 10,000 percent or more. Most merchants, on the other hand, subsist on skimpy margins of a percentage point or two.
That hurts merchants, including the people who sell you back-to-school supplies. Back-to-school spending per family will hit $669 this year, up 5 percent from $635 last year, according to the National Retail Federation.
If the family puts the whole amount on its credit cards, the merchants could wind up paying as much as $27 of that in swipe fees.
(Total spending on school stuff will drop slightly to $26.5 billion because there are slightly fewer students in households this year.)
But what most consumers don’t know is that when banks hammer merchants like this, the merchants’ only recourse is to raise prices. That means you pay more for everything from gas to groceries – even if you don’t use a credit card.
Swipe fees invisible to consumers have swollen to the point that they are now many merchants’ second-largest operating expense, after labor, and ahead of rent and utilities. In the gas and convenience store industry, swipe fees have grown larger than profits for several years now. Fees in the U.S. are seven or eight times higher than in Europe – and the highest in the industrialized world.
The banks can charge these outrageous fees because Visa and MasterCard control most of the market and fix fees at unconscionable rates. That is not how the free market is supposed to work. But merchants are over a barrel – they have to accept cards or go out of business.
It’s especially hard on small businesses – the diner down on Main Street, the small town’s lone sporting goods store, the corner grocery, the homegrown pizzeria, the local gas-and-go. And of course, it’s also hard on the consumer.
It’s not fair. It’s not the way Americans do business. It’s not the free-market system that built the world’s largest economy. Price-fixing swipe fees raises prices for consumers, with the biggest burden falling on people with the fewest resources. The fees hurt merchants and in fact are so large that they hurt the entire economy.
We need to reform this malignant anomaly growing in our free-market system. If we don’t, buying back-to-school supplies – and everything else – will just keep getting more painful.
For more information about unfair 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.