Hey, Where’d That Banker Come From? How Hidden Bank Fees Will Cost You on Labor Day
WASHINGTON--(BUSINESS WIRE)--More Americans will be hitting the road this Labor Day, while their bankers have their hands in travelers’ pockets the whole trip. And those travelers won’t even know about this highway robbery.
Your bank charges the merchants who sell you gas, a steak dinner or a tee shirt and a pair of shades every time you use a credit or debit card to buy something. You and the merchant get hit whether you’re driving a few hours to the beach or jetting to the other end of the country; grabbing some hotdogs from a street vendor or dining at a fine restaurant.
The problem is Visa and MasterCard control such a big chunk of the credit-card market that they can fix what the banks charge on these “swipe fees” at outrageous levels in order to lure more banks to their brand.
This price-fixing creates one of the biggest fees you’ve never heard of; drives up the prices you pay; hurts merchants, especially small businesses; and oppresses the economy because consumer spending is such a key piece of economic health.
Consider the impact: Domestic airfares have risen almost 7 percent this year, according to the travel website Travelocity, to an average $343 for a round-trip. At 2 percent, the swipe fee on that ticket would be around $7. Doesn’t sound like much? Well, consider these facts: It cost the bank only a few pennies to process the purchase. The rest is gravy.
And these fees keep growing despite increases in sales volume and advances in technology that would lower prices in normal industries with free markets. The fees add up to $50 billion a year for banks. And, of course, that means higher prices for you.
For some transactions, the fees go as high as 4 percent. Because merchants, unlike the credit-card companies, are in a highly competitive industry, they face two bad choices: Not accept cards and go out of business, or take cards and be gouged by their customers’ banks.
Or consider this: Two-fifths of the 1,000 people the car-shopping site Edmunds.com surveyed said they plan to take a road trip this Labor Day. Say they gas up their SUV for $80. That could be $2 or more in swipe fees, or a profit margin of about 10,000 percent, while most merchants get by on a margin of just a couple percent.
Not driving? Demand for airline tickets is up 20 percent before this Labor Day, according to Expedia.com, another travel website. Demand for hotels rooms has risen 30 percent, and room rates have risen to an average $180 a night (and as much as $7 or more in swipe fees.)
It’s gotten to the point that many merchants pay more in fees than they earn in profits. For many retailers, swipe fees are their second-largest operating cost after labor.
And then there’s this: How is it that the fees are seven or eight times higher here, the bastion of free enterprise, than in Europe, where Visa and MasterCard also operate? There is no good reason, other than we allow the price-fixing that European regulators have stopped.
This gouging by the banks has real, practical effect people should know about.
It’s time to stop the banks’ depredations and give ourselves a break on prices, give our local merchants a break from the banks having their hands in retailers’ pockets and give our economy a lift.
For more information about unfair credit-card swipe fees, go to the Merchants Payments Coalition website: http://www.unfaircreditcardfees.com/
The Merchants Payments Coalition – at UnfairCreditCardFees.com - is a group of retailers, supermarkets, drug stores, convenience stores, fuel stations, on-line merchants and other businesses fighting against unfair credit card fees and 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.