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No victory in swipe fee settlement

CCMerchants have been fighting credit card companies over swipe fees for years. As the battle drags on, you may have noticed more mom-and-pop retailers have instituted a minimum purchase amount for credit card purchases.

Thanks to a recent settlement, merchants will now be able to pass swipe fees on to consumers rather than incurring them themselves.

The Wall Street Journal interviewed about two dozen retailers, many of whom said they aren't sure whether they want to risk alienating their customers by passing the cost of swipe fees on to them:

Steven Resnick, a partner at the accounting firm Resnick Amsterdam Leshner in Blue Bell, Pa., which sued Visa and Mastercard, says he would "definitely not" impose a surcharge on clients because "it would be like we're nickel-and-diming them," he says.

SwipeAfter complaining about being nickel-and-dimed by the credit card companies, one would hope merchants wouldn't want to turn around and do the same to their own customers.

The swipe fee settlement is a messy victory for merchants. They are no longer required to pay the surcharge themselves, but they still have to figure out who pays it. The credit card companies still get their money, which amounts to about 1 percent to 3 percent per transaction. But it begs the question, especially in a society where one almost cannot function without plastic, what is so costly about the system that every swipe costs so much?

According to swipe fee reform group the Merchants Payments Coalition, the money brought in through swipe fees far exceed the cost of doing business. In fact, they bring in twice as much money as ATM fees and overdraft charges:

What started in the 1960s as a fee to cover the transaction costs of using plastic is now a cash-cow for the big banks that issue 90% plus of all MasterCard and Visa cards.  According to a consultant for the big banks, only 13% of the credit card interchange fee goes to processing credit card transactions; much of the rest goes to pay for billions of pieces of unsolicited junk mail annually among other dubious credit card marketing activities aimed at students or those with bad credit histories.

The more people you ask, the more it sounds like the recent settlement was a victory for no one but the banks, who get to keep the status quo.

tagged

Banks | Regulation | Retail | Small Business
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