Credit card swipe-fees are back in the spotlight

Last week, the National Retail Federation urged the House Judiciary Committee to approve legislation sponsored by Chairman John Conyers, D-Mich., that would require Visa and MasterCard banks to negotiate over the terms and conditions associated with the $48 billion in credit card swipe fees paid by merchants and their customers each year.

“The fact that you’re seeing this issue being widely discussed both here in Washington and in the states shows that people have finally come to understand the huge financial impact these fees have on consumers and the economy,” NRF senior vice president and general counsel Mallory Duncan said. “It has become clear to lawmakers that these fees drive up consumer prices. We can’t afford to have this much money diverted into banking profits at a time when Main Street businesses and working families are struggling to recover from the economic downturn.”

Officially known as interchange, swipe fees average about 2 percent of the purchase price and are charged to merchants by Visa and MasterCard banks each time one of their cards is swiped to pay for a purchase. Collections totaled $48 billion nationwide in 2008, triple the $16 billion collected when NRF began tracking the fees in 2001.

Also last week, a major consumer organization told a congressional committee that credit card swipe-fees collected by Visa and MasterCard banks drive up prices and hit poor people the hardest.

“Interchange fees are hidden charges paid by all Americans regardless of whether they use credit, debit, checks or cash,” U.S. Public Interest Research Group Consumer Program Director Edmund Mierzwinski said. “These fees impose the greatest hardship on the most vulnerable customers – the millions of American consumers without credit cards or banking relationships. These consumers subsidize credit card usage by paying inflated prices for many goods and services.”

Card companies have argued that restrictions on swipe fees could put an end to popular credit card reward programs that the fees help pay for, but Mierzwinski said “all consumers pay for rewards in the form of higher prices for the goods they purchase every day” and that only a small portion of cardholders actually receive the rewards. Low-income shoppers without credit cards subsidize the affluent individuals who do benefit, he said.