Why are our swipe fees so high?

This is sort of like pharmaceuticals. Credit card companies hit Americans hard because they can. EU now pays a fraction of what our merchants and ultimately customers pay to use a credit card. Do we really have a sign on our backs that say “kick me”?

11 thoughts on “Why are our swipe fees so high?

  1. Indeed, merchants are still paying the same fees as when paper slips were used to enter transactions. Automation should have brought costs down, somehow competition is being suppressed.

    Those excess costs to merchants of course are passed on to consumers.


    1. “Those excess costs to merchants of course are passed on to consumers.”

      In some cases it is BALTANTLY done. I had a customer yesterday who offered to pay cash so my company wouldn’t have to pay the +3% fee charged by the bank. As we talked about it, he told me the restaurant he went to this past weekend INCLUDED a 3% CC fee ON HIS BILL.

      Those fees are small business killers.

      I don’t know about competition being suppressed. I do believe those companies have spent a LOT on politicians (in a bipartisan manner, a la Dominion in VA) to prevent the fees being regulated a bit

      Yeah, I know, regulation is four letter word at the compound. But there are times when they do benefit the little guys.

      Liked by 1 person

        1. Assume all you want, but the point is these fees are not effectively regulated. It is beyond clear that the mega-banks are avoiding competition with each other in order to maximize their take – a form of de facto collusion.

          Liked by 1 person

          1. “I’m going to guess that minimum reserve requirements are keeping upstarts out.”

            That may be. But there are many banks in the game and they are obviously not competing with each other on these swipe fees. None of them is willing to risk knocking the gravy train off the rails. Some problems, believe it or not, are not caused by the government.

            Liked by 1 person

  2. RE: “Do we really have a sign on our backs that says ‘kick me’?”

    That’s an interesting question that inspires a variety of thoughts. Here are two:

    • Could it be that the U.S. has become an oligarchy wherein an elite minority controls the swipe fees?
    • Would it be wise to use the federal government to set swipe fee rates, a form of price control?

    The first suffers from a lack of evidence. The second involves a basic tenet of economics — that price controls are almost always counterproductive.


    1. Well if EU fees are 2% less, that can mean their goods and service are less at the consumer level. No more of a price control than usury laws about excessive interest.

      Consumer protections are not onerous, but seem to be necessary so Americans don’t get screwed so often by other Americans.

      Now an oligarchy for this? Not necessary when competition is clipped by the huge companies that provide card service to billions worldwide.

      I am sure that those doing credit card business in EU are not suffering. Just like drugs and medical devices still sell well, and profitably, outside the US.

      Liked by 2 people

    2. RE: “No more of a price control than usury laws about excessive interest.”

      The analogy sounds like a rationalization to me. It is not clear that current swipe fees amount to usury, especially since there is no claim that the fees are illegal.

      I think an economist would argue that usary laws are indeed a type of price control. So, if we’re going to have price control laws the question becomes, Are we going to have them for intelligent or for emotional reasons?


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