According to the latest release from Merchants Payments Coalition (MPC), it won’t be just hot dogs that will get a good grilling over hot coals this Fourth of July. The merchants who sell them will get their very own special kind of grilling by the banks.
In fact, the people who sell everything from bunting to bottled water to barbecue sauce, from corner convenience stores to the biggest grocery chains, get gouged by the banks every time a customer buys something with the swipe of a credit card.
Observing how the banks pervert our free-market system, though, is especially ironic on a holiday which celebrates the freedom that democracy and free enterprise have brought Americans — free enterprise except, of course, for these anti-competitive “swipe fees,” which most Americans don’t even know about.
According to a small survey conducted by MPC (of which NACS is a member), on Instant.ly, a do-it-yourself market research website, the majority of Americans won’t travel on the long July Fourth weekend. Those people instead are likely to buy something to put on the grill over the weekend. That’s a lot of retail purchasing, and a lot of fees for the credit card companies.
Or consider airfares for those who will travel. The online travel agency Travelocity says New York City, Los Angeles and Orlando will be the most popular destinations this holiday. The average cost of a round-trip ticket in the U.S. will be $400. Even at 2%, the typical swipe fee for airline tickets, that’s $8 airlines will be forking over to the banks for a service that costs only the tiniest fraction of that. When those travelers get to New York, the average hotel rate per night will be $236, says Travelocity, which at 2% is almost another $5.
Those kind of anti-competitive profit margins add up to huge, multi-billion-dollar windfall profits for banks while merchants, who often count their profits in a few pennies on the dollar, have no choice but to swallow the fees if they want to keep accepting credit cards.
This is an issue that should concern both political parties on this most important of the non-religious holidays. Not only do Visa and MasterCard subvert the open markets our capitalist system was built upon, but they also hurt consumers and small businesses. For some of these, swipe fees are second only to labor in operating costs these days, more than rent or utilities. Some businesses pay more in fees than they make in profits.