From burgers to back-to-school, banks — not retailers — bring in the big bucks
While you’re grilling hot dogs and hamburgers this summer, your bank will be barbecuing the merchants who sold you the food, according to the Merchants Payment Coalition (MPC).
In a press release earlier this week, MPC cites the example of a typical summer barbecue, on which Americans will spend about $60. According to MPC, on an average $60 purchase, the bank may charge retailers as much as 4%, or $2.40, in swipe fees.
These fees represent a huge chunk of the merchant’s profits flying right out the window. Many merchants — including those in the convenience and fuel retailing industry — subsist on a profit margin of less than 2%. So the banks may be earning more than the merchant on each sale. (That’s already true, for instance, with convenience stores that sell gas.)
Because merchants compete so fiercely there’s little room to absorb these ever-increasing swipe fees. So merchants have to pass the cost on to consumers in higher prices. These predatory fees hurt retailers, a huge chunk of our economy, which means the banks’ greed not only costs more at the store but also holds down growth.
An economist who surveyed the modest reform brought by the Durbin Amendment, in which Congress asked the Federal Reserve to set reasonable swipe fees on debit-card purchases, found that the savings let merchants create 37,000 more jobs in 2012, the first full year the amendment took effect. Not to mention that the amendment saved consumers nearly $6 billion. Both these numbers would have been much larger, said economist Robert J. Shapiro, if the Fed had done exactly what Congress intended instead of acceding to heavy bank lobbying and pulling its punches.
Earlier this week, NACS, along with several merchant associations and companies, filed a writ of certiorari with the U.S. Supreme Court, asking the Court to hear their appeal of the D.C. Circuit Court of Appeals ruling that upheld the Federal Reserve’s debit swipe fee rules.