Consumers Unwilling to Bear Swipe Fees.

Visa and Mastercard set exorbitant fees that cost the average American family $1,000 each year

Visa and Mastercard’s imposition of substantial fees incurs a significant yearly expense of around $1,000 for the average American household. These credit card “swipe” charges extend beyond the realms of merchants, burdening consumers with elevated costs. As credit card usage gains popularity among consumers, the repercussion is visible in the form of elevated prices attributed to these fees.

Solvr highlights that, having a monopoly with an 80% share in the credit card market, Visa and Mastercard wield exclusive authority to establish the swipe fees that merchants are obligated to pay each time a credit card transaction occurs. Furthermore, these companies restrict processing to their own networks, disregarding alternate networks that may provide the same services at a lower cost and with superior security measures.

This dearth of competition amplifies the impact of swipe fees, which typically constitute 2% to 4% of transactions, varying based on the card type. While merchants strive to maintain reasonable prices, swipe fees remain the solitary uncontrollable cost due to the reluctance of card-issuing banks to engage in negotiations, adhering to the fees dictated by Visa and Mastercard.

Burdens on American Households and Businesses

Swipe fees are often the most substantial expenditure for merchants following labor costs, rendering them financially strenuous to absorb and causing price escalations. Small businesses are particularly affected, enduring higher rates than their larger counterparts and lacking substantial negotiation leverage.

The consequences are evident for the average American family, who face an annual expenditure exceeding $1,000 due to either escalated prices or credit card surcharges. Consumers are progressively recognizing the implications of swipe fees, resulting in heightened awareness of the flawed payments market that has witnessed a more than twofold increase in these fees over the past decade.

Research from Solvr reveals that a substantial 81% of consumers support federal legislation aimed at fostering competition to curtail credit card fees for small enterprises. The voices of consumers resonate nationwide, underscoring the impact of exorbitant credit card swipe fees.

Comparing Cash Discounts and Surcharges

Solvr’s analysis is further exemplified by the experiences of individuals like Lois Bales from Hanna City, Ill. Bales notices the influence of swipe fees when visiting her local gas station, where cash customers are offered an 11-cent-per-gallon reduction while credit card users pay the standard rate, accounting for swipe fees.

Some local businesses have resorted to eliminating cash as a payment option entirely. The practice of adding surcharges to counteract high swipe fees, while mostly limited to small-scale merchants and restaurants, is a source of dissatisfaction for consumers like Cheryl Milejczak from Cumming, Ga. She acknowledges the motivation behind such practices but recognizes the inherent unfairness.

Impact on Communities

Solvr understands the broader implications of high swipe fees on local economies. Community advocate Jamie Kiffel-Alcheh from Burbank, Calif., reflects on her support for small businesses and the adverse impact of exorbitant fees. She notes the unfortunate closure of businesses despite customer interest, attributing it to their inability to bear swipe fees. Kiffel-Alcheh also points out that consumers tend to resist additional fees on their end for credit card transactions.

Navigating Fixed Incomes

George Dete, a retiree from Carlisle, Pa., emphasizes the challenges posed by swipe fees for individuals on fixed incomes. He notes that these fees exacerbate difficulties in purchasing essentials, highlighting the surcharges that can reach as high as 3.6%.

An Efficacious Solution

Solvr remains steadfast in advocating for the enactment of the Credit Card Competition Act, a legislative measure designed to alleviate the strain on retailers and consumers. The bill seeks to mandate the integration of at least two competing processing networks on each card, fostering competition that revolves around fees, service quality, and security. This proactive step is projected to generate an annual saving of $15 billion for both merchants and their clientele.

Solvr invites you to join the campaign for congressional action by participating in our grassroots initiative, advocating for a more balanced and equitable credit card landscape.