Recently reported by the Merchants Payments Coalition (MPC), rising swipe fees banks charge merchants to process credit and debit card transactions could potentially cost consumers over $500 million in higher prices for Valentine’s Day items this year.
“There’s nothing romantic about swipe fees,” Doug Kantor, MPC executive committee member and National Association for Convenience Stores (NACS) general counsel, said. “Swipe fees can mean fewer flowers in the bouquet, fewer chocolates in the box and fewer carats in the ring because they drive up the cost of everything Americans buy. For couples celebrating on Valentine’s Day, that means they may have to settle for less than they could have if these fees weren’t out of control.”
Consumers are expected to spend an average of $193 on Valentine’s Day items such as candy, flowers, jewelry, greeting cards, clothing and evenings out this year for a total of $25.9 billion, according to the National Retail Federation (NRF). Based on the average 2.22% rate for Visa and Mastercard, that would include $4.28 in swipe fees — as much as a Valentine’s greeting card or a piece of chocolate from a mid-priced gift box — and would add up to $575 million nationwide if all purchases were made with credit cards.
Everything costs more on Valentine’s Day, giving banks and card networks a lucrative bonus as they take their percentage. A $100 bouquet of roses with a vase ordered online for delivery and paid for by credit card can include close to $2.75 in swipe fees by the time swipe fees on shipping and sales tax are included. Swipe fees on a heart-shaped $60 box of chocolates amount to about $1.30. A $200 prix fixe dinner for two can run over five dollars for swipe fees on the meal and tip, and a $50 bottle of wine or champagne adds another dollar in swipe fees.
The biggest swipe fee cost can come for couples who get engaged on the most romantic day of the year. BRIDES magazine said couples spent an average of $3,756 on an engagement ring in 2020, which would include a swipe fee of $83.
Exact figures are difficult to calculate because not all purchases are paid for with credit cards. But about 75% of in-person purchases are made with plastic, according to the Federal Reserve, and card industry rules make cash discounts difficult for those who don’t. For those buying online, virtually all purchases are paid for by debit or credit card and swipe fees are even higher than in-store.
Credit and debit card swipe fees — which doubled over the past decade and soared 25% to a record $137.8 billion in 2021 — are most merchants’ highest operating cost after labor. The fees are far too high to absorb, especially for small merchants, and drive up consumer prices by nearly $1,000 a year for the average family.
The impact of swipe fees comes as the Credit Card Competition Act — introduced last year by Senator Richard Durbin, D-Ill.; Senator Roger Marshall, R-Kan.; Representative Peter Welch, D-Vt. (now a senator) and Representative Lance Gooden, R-Texas — is awaiting reintroduction in the new session of Congress.
“Cupid can’t cure credit cards, but Congress can,” Kantor said. “Congress needs to make the card industry compete for the same as any other industry and keep swipe fees from taking the romance out of Valentine’s Day.”
The legislation would end Visa and Mastercard’s longstanding monopoly over how transactions on cards issued under their brands are routed for processing. Instead, cards from the nation’s largest banks would be required to be able to be routed over at least one competing network in addition to Visa or Mastercard’s networks. Banks would choose which networks to enable, but merchants would then choose which to use, meaning networks would have to compete over fees, security and service, saving merchants and their customers an estimated $11 billion a year. Rewards points would not be affected, security would be improved, consumers would still use the same cards, and community banks and small credit unions would be exempt.
The Merchants Payments Coalition represents retailers, supermarkets, convenience stores, gasoline stations, online merchants and others fighting for a more competitive and transparent card system that is fair to consumers and merchants.