Credit card swipe fees under attack

The U.S. Dept. of Justice filed a lawsuit to protect merchants from excessive charges.

Employee Staci Caldow processes a credit card Friday afternoon at House of Hanson.

Employee Staci Caldow processes a credit card Friday afternoon at House of Hanson.

Jennifer Bissell

Paying $2,000 a month on âÄúswipe feesâÄù to credit card companies, House of Hanson owner Laurel Bauer said it can be expensive for the Dinkytown grocery store to accept payments via credit and debit cards.
âÄúAt this point itâÄôs about 22 to 25 cents per swipe plus a percentage of the sale,âÄù Bauer said. âÄúBut if I didnâÄôt take credit cards, half my business would walk down the street to somebody else who would.âÄù
To help protect merchants from excessive swipe fees, the U.S. Department of Justice filed a civil antitrust lawsuit Oct. 4 against American Express, MasterCard and Visa.
The department has reached a proposed settlement with MasterCard and Visa that, upon court approval, will allow merchants to tell customers their preferred payment methods and offer discounts on cards with low swipe fees.
American Express, which charges the highest swipe fees, has not agreed to the settlement.
âÄúWith todayâÄôs lawsuit we are sending a clear message: We will not tolerate anticompetitive practices,âÄù Attorney General Eric Holder said in a statement. âÄúWe want to put more money in consumersâÄô pockets, and by eliminating credit card companiesâÄô anticompetitive rules, we will accomplish that.âÄù
Every year credit card companies collect approximately $35 billion from U.S. merchants in swipe fees, according to the Justice Department.
To make up for their losses, businesses will often increase the price of their goods, passing the fee down to the customer, said Craig Shearman, a senior director for the National Retail Federation.
âÄúMost consumers havenâÄôt even been aware of these fees and donâÄôt realize how much extra theyâÄôre paying in order to use a credit card,âÄù Shearman said.
The average family could be spending an extra $427 a year on hidden fees, according to the NRF.
Currently, the House of Hanson combats the interchange fees by asking customers to make a minimum purchase of $5 when using a credit card, Bauer said.
âÄúIâÄôve had people come up with a pack of gum [and] I barely make 22 cents on a pack of gum,âÄù Bauer said. âÄúJust to swipe the card, IâÄôm either negative money, or make nothing on that sale.âÄù
Previously, purchase minimums violated contracts with credit card companies because they inhibited card use.
But since the passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act in July, merchants can now require a minimum purchase amount of up to $10 to ensure reasonable processing fees.
The act also allowed merchants to offer discounts for cash payments, and the Justice DepartmentâÄôs lawsuit against the credit card companies is an extension of that policy.
The settlement with MasterCard and Visa will most likely lead to greater transparency in pricing because retailers will be able to ask customers for more when using specific cards, Shearman said.
If customers end up learning their cards have higher swipe fees than others, the demand for cards with cheaper fees will probably increase, Shearman said.
Bauer said she understands the companiesâÄô motivation for the fees.
âÄúThey feel theyâÄôre doing a service. TheyâÄôre handling money, and they figure they got bills to pay too,âÄù Bauer said. âÄú[But I] just canâÄôt run a business breaking even on a sale.âÄù