Swipe Fees - Stop giving billions away
Swipe fees always increasing
The United States is having economical troubles and yet there is a push to delay reform to credit card "swipe fees".And for anyone who doesn't know about "swipe fees", these fees are what is known as interchange fees or a fee for using electronic funds, be it debit cards or credit cards.Currently, there are charges associated when purchasing goods and/or services via credit cards and debit cards.The average swipe fee for credit cards are: Visa, MasterCard, and Discover card charge 1-2% per transaction and American Express has a swipe fee of 3.5% [source: creditcardassist.com]. These fees do seem small at first but when a person investigates the additional cost of swipe fees and the increase over the last decade it comes down to this: in 2001 the average American family spent an additional $159.00 because of swipe fees and now the average American family spends an additional $427.00 [source: nrf.com]. In a single decade these swipe fees have increase by over 268%.
Swipe fees and how they work
Swipe fees are a take-it-or-leave-it offer to merchants; if the merchant accepts credit cards and/or debit cards they are stuck with this charge. Swipe fees are charged to everyone even if a person doesn't use a credit card or debit card and here is how it all works. The merchant is charged a swipe fee, this fee is off-set by increasing prices of products and/or services to the consumer, and here is a kicker for all consumers. The credit card companies have it stated that all additional charges added to a product to cover the swipe fee will be the new regular price. This means that if an item had cost $100.00 before the swipe fee and there is a 2% swipe fee, the new regular price of the item is $102.00 - i.e. add tax to $102.00. The increased price has to be charged to all customers no matter what form of payment they use and this price is what you, the consumer, also pay taxes on [source: uspirg.org].
Durbin Swipe Fee Amendment
July 21, 2011 is suppose to be the day that the Durbin Swipe Fee Amendment is suppose to cap swipe fees to 7¢ to 12¢ for debit cards is what the Federal Government proposed last December. This cap fee would be on debit cards, but this swipe fee change would have seismic activity through-out the financial world. And the caps would most likely be reciprocated and reign in these hidden fees. The end result would be a savings and quite possibly a cut in pricing for consumers.
Why do we support reform? Interchange fees are set by the Visa/Mastercard cartel, not by the market; the fees are anti-competitive, non-negotiable and non-transparent and result in all retail customers, including cash customers, paying more at the store and more at the pump. Many countries have zero interchange fees; most others have fees lower than those here. Interchange on debit and credit together averages nearly 2%. That means 2 cents of every retail dollar you pay with plastic goes to the bank, not to the store. Two cents of every dollar. And the stores cannot negotiate it. Oh, if I pay with an airline rewards credit card, it's actually as much as 4 cents. Merchants pay between 1-2 cents per dollar for a debit card purchase. After its study of interchange and bank costs, the Fed's proposed rule would lower debit interchange to just 7-12 cents per transaction.
"This is great news," many people are probably thinking right now. And so far it has been good. We have looked at what swipe fees are and how they hurt consumers with final pricing. And, now that we have seen what the Durbin Swipe Fee Amendment calls for let's look at what the financial sectors are trying to do.
Durbin on swipe fee reform
Download Original Debit Interchange Fee Study Act
- Original Proposal: 176 pages
The original 176 page Debit Interchange Fee Study Act proposal.
Peanuts from the financial sector
Bloomberg.com has a quote from Peter Welch (D-Vermont) on their site saying, "I haven’t been inWashington that long, at least not as long as Senator Durbin, but I do know, in Washington, to delay something means to kill it," and this is exactly what Jon Tester (D-Montana) and Bob Corker (R-Tennessee) want to do with the Debit Interchange Fee Study Act of 2011. This would be a two year study and each and every month the cost to consumers for keeping the current swipe fee would be over $1 billion. Tester has amended the duration of this study to 15 months. This is something that doesn't make sense for the consumer in my mind.
Take a stand: Sign a petition
The National Retail Federation (NRF) has created a new Take Action Center at http://swipefees.nrf.com. If people follow the steps and fill the information out to send emails out letting their representatives know where they stand it will help a great deal. Our government is based on our government representing what the majority wants. Each and everyone of us is a consumer, why would you want to give your money away with prices spiraling out of control?
Consumers and Industry
This article has mainly talked about how these swipe fees are hurting our consumers. I also wanted to point out with the retail industry making more money there will be more opportunity for growth as well. This growth is not only in the form of wages, but also in the form of jobs. An industry that is closing in on 5,000,000 workers. In 2008, the median wages were as follows for some sub-categories of the retail industry as provided by the Bureau of Labor Statistics:
- Automobile dealers $18.91
- Building material and supplies dealers $11.95
- Other general merchandise stores $9.22
- Department stores $9.14
- Clothing stores $8.94
This is an email that everyone can send that will help not only their pocketbook, but also the wages and job opportunities of people who need them. I hope you will take the time to send this email and support a great cause.