Small Businesses: Reform of Huge, Hidden “Swipe Fees” Must Be Part of Credit Card Fix for It to Work
As White House Turns Up Pressure on Credit Card Companies, Swipe Fees Called “Interchange” Cost Consumers and Small Business More Than All Other Fees Combined
Washington, DC - Today’s White House meeting made it clear that we can’t fix our economy without fixing the abusive and predatory practices that the credit card industry has used to rake in massive profits on the backs of America’s consumers and Main Street small businesses. And any credit card fix will be undermined unless the White House and Congress take on the biggest - and most hidden - fee of them all, the one banks charge every single time someone swipes a card to make a purchase.
This swipe fee - called “interchange” - costs Americans more than two dollars out of every $100 they spend, and it racked up $48 billion for the big banks last year. That’s more than annual fees, cash advance fees, over-the-limit fees, and late fees combined.
“As long as big banks are raking in huge, hidden swipe fees through interchange, we won’t solve the credit card problems squeezing millions of consumers and Main Street businesses,” said Lyle Beckwith, Senior Vice President of the National Association of Convenience Stores, which represents thousands of small businesses that are disproportionately hurt by interchange fees.
“The swipe fee cash cow is simply too much of an incentive - big banks will find new ways to keep consumers tricked, trapped, and hooked on credit cards, even when they can’t afford them.”
Most consumers don’t know it, because swipe fees are set in secret and hidden from cardholders, but the banks have been aggressively raising these fees, even as the economy has tanked and the cost of processing credit cards has dropped dramatically. For example, the average interchange fee charged by one of the card networks on motor fuel rose 23% between July and December 2008. And that cripples small businesses and forces prices up on everything Americans buy, whether they pay with plastic or not.
American consumers pay the highest interchange fees in the world. Other countries around the world have reined in this abuse, and it’s time for our leaders to act. Until they take on huge, hidden swipe fees as part of comprehensive reform, consumers and small businesses will continue to be at the mercy of abusive credit card practices.
UnfairCreditCardFees.com and the Merchants Payments Coalition is a group of convenience stores, retailers, and small business owners whose membership associations represent approximately 2.7 million stores and 50 million employees.