Better Retail Sales Are Only a Mixed Blessing for Retailers Gouged by Bank “Swipe Fees”

The following press release was issued by Merchants Payments Coalition:

Retail sales rose in the third quarter, obviously good news for the economy since retail is such a big chunk of all economic activity. But it’s too bad retailers won’t fully benefit thanks to the banks gouging them on credit-card swipe fees.

Sales rose more than 4 percent over last year, the U.S. Commerce Department reported, and September was especially strong after August sagged.

But retailers aren’t celebrating yet. That’s because banks will shave as much as 4 percent off merchants’ sales for processing credit-card transactions, or $4 for every $100 worth of gas or groceries a customer buys by swiping a card. Yet each transaction costs the banks only a few cents to process, for profits on these “swipe fees” of more than 10,000 percent.

How do they get away with this outrageous, harmful behavior? Because this market, unlike most of the rest of the free-market system that built the biggest economy in the world, is rigged. It’s not competitive.

Visa and MasterCard control the market and each sets the fees banks charge merchants at exorbitant rates in order to draw banks to the Visa or MasterCard brand.

That’s great for banks, but really bad for merchants and their customers. Because retail is a competitive market – in contrast to the swipe-fee business – and retailers subsist on paper-thin profit margins of a percent or two, retailers must pass along at least some of these exorbitant fees to customers in higher prices.

That hurts consumers, and in turn merchants – especially smaller ones – and ultimately hampers the entire economy. These fees are bad for everyone but the banks.

Swipe fees have swollen to the point where they are now many merchants’ second-largest operating cost after labor (and higher than rent). Many merchants pay more in swipe fees than they earn in profits.

In Europe, where regulators have made markets more competitive, swipe fees are seven or eight times lower than they are here in the U.S.

The banks throw up a huge smoke screen whenever swipe fees come up because of the billions of dollars in profits involved. Don’t fall for their propaganda. Swipe fees cost you money, cost the economy jobs and new businesses, and hurt small businesses.

It’s time to make the market fair.

Learn more about unfair credit-card 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.