As Gardening Blooms, Banks Are Out to Reap Outrageous Profits

WASHINGTON--()--Americans are buying more soil, fertilizer, crape myrtle shrubs, pansies and other gardening supplies than ever. And thanks to their banks and the credit card companies, they’re paying more for these things, too.

Every time you swipe a credit or debit card to buy something, your bank takes a generous chunk of the purchase price. Because Visa and MasterCard control the vast majority of the credit-card market, each fixes these “swipe fees” at outrageous rates so it can attract more banks to its brand.

Merchants have no choice but to pay these huge swipe fees. And they really add up. Let’s say you drop $100 on petunias and potting soil at your local garden supply shop. The bank takes as much as $4 of that to process a transaction that costs the bank just a few pennies. That’s around a 10,000-percent profit.

And the garden-shop owner has no choice but to pass some of that $4 along to you in higher prices. It’s either that or refuse credit cards and go out of business.

That’s good news for the banks because Americans spent almost $35 billion last year on gardening, up by almost a fifth, according to the nonprofit National Gardening Association. That was the biggest jump in the last dozen years or so. And experts say the boom continues into this year, despite worries that slow housing sales would put a dent in gardening purchases.

But selling gardening supplies, like selling almost everything else, is a highly competitive business. Unlike the banks, many merchants subsist on profit margins of a percentage point or two. Add to their costs, and they have to raise prices. But lower their costs and – because they compete so fiercely – they pass along savings to customers.

Look at what even a modest reform of the debit-card side of the industry accomplished. In 2010, Congress decided banks were charging too much when people bought things with their debit cards, and asked the Federal Reserve to come up with a reasonable rate. The Fed, unfortunately, bowed to heavy bank lobbying and declined to cut fees by a reasonable amount. But even the modest changes it made helped.

An economist who studied the law – the Durbin Amendment to the Dodd-Frank Wall Street reform law – calculated it saved consumers almost $6 billion in 2012, its first full year, and created 37,500 jobs. Had the Fed followed the law, consumers could have saved almost another $3 billion.

Meanwhile banks gouge American merchants with swipe fees that continue to be seven or eight times larger than what banks charge in Europe, where Visa and MasterCard are also big players. There is no reason other than greed why it should be that much more expensive here.

Some retailers now pay more in swipe fees than they earn in profits. For many, the fees are now their second-largest operating expense, after labor – more than rent or utilities.

The big banks would rather you not know this. But you need to know because swipe fees, though hidden from consumers, affect you every day. Even if you don’t use a credit or debit card, they raise prices on the clothes and gas and groceries you buy. They hurt retailers, who are a huge chunk of our economy, many of them small-business people. And they weigh down the economy. All because Visa and MasterCard exploit their dominant position in the market to fix prices.

That’s not the free-market system. That’s throwing your weight around because you have an unfair advantage. And it’s not how our system is supposed to work, with Wall Street beating up Main Street. And yet swipe fees continue to rise every year.

Unfortunately, this issue is not just about gardening: It’s about the health of our entire economy.

For more information about unfair swipe fees, go to the Merchants Payments Coalition website:

The Merchants Payments Coalition - - 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.


Merchants Payments Coalition
Michael Flagg, 202-253-4164


Merchants Payments Coalition
Michael Flagg, 202-253-4164