Talking Turkey: How “Swipe Fees” Will Get Banks a Heaping Helping of Your Thanksgiving Dinner

The following press release was issued by Merchants Payments Coalition:

After you load the turkey, pumpkin, potatoes and cranberries into your shopping cart at the local grocery store, the banks will be waiting at the checkout to grab a huge chunk of what you pay when you swipe a credit card.

And that means higher prices for Thanksgiving dinner fixings, even if you don’t use a card to buy them.

The average Thanksgiving dinner for 10 costs about $50, according to the American Farm Bureau Federation.

The banks are able to charge merchants outrageous “swipe fees” to process credit-card transactions because Visa and MasterCard control most of the market and each illegally set fees for their member banks.

Swipe fees can run as high as 4 percent, which on $50 would be $2. It costs the bank only a few pennies to actually process the transaction, so profit margins on this business can run as high as 10,000 percent.

Merchants such as grocers, on the other hand, often eke out a living on margins of a percentage point or two because retailing is so hyper-competitive. They must pass at least some of these inflated costs on to you, the consumer, or go out of business.

Americans will gobble up 51 million turkeys this Thanksgiving, or about a quarter of all the turkeys produced in the U.S. this year, according to the federal Department of Agriculture. We’ll spend $2.4 billion on those turkeys, cranberry sauce, pumpkin pie, mashed potatoes and the rest. Four percent of that is $100 million – and that’s just one holiday. It’s a sweet deal for the banks, which take in around $50 billion a year in swipe fees.

Meanwhile your local merchants suffer under the weight of this unfair price-fixing, which for many is now their second-largest cost after labor. Some industries, like gas and convenience stores, pay billions more in swipe fees than they earn in profits.

Consider turkeys: Wholesale prices to merchants are rising because a drought in 2012 raised the price of grain to feed turkeys. That means farmers are producing fewer turkeys this year, which in turn means they are charging more for them: A record $1.24 a pound recently, according to the financial news provider Bloomberg, up 16 percent over last year.

But grocers will have to eat much of that increase because they traditionally use cheap turkey prices to get shoppers into their stores at Thanksgiving and Christmas. Then, on top of that, the banks will still be taking their cut of the merchant’s revenues. It’s hard on grocers.

Yet it’s possible to curb these abuses: In Europe, merchants pay seven or eight times less in swipe fees.

American merchants need that kind of relief. Many are small businesses, the biggest job creators in the country. When they hurt, our economy hurts, since consumer spending and retail are such a huge chunk of our recovering economy.

As economies slow down in Europe, Japan, Russia and even China, the last thing Americans need is an unfair system that reduces consumer spending and burdens our own economy.

All merchants ask is a market that is not fixed; that looks like the rest of our free-enterprise system, where the laws of supply and demand set prices, unfettered by illegal price-fixing by banks and credit card companies.

For more information about unfair swipe fees, go to the Merchants Payments Coalition website: http://www.unfaircreditcardfees.com/

The Merchants Payments Coalition - UnfairCreditCardFees.com - 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.