Down to Business: ‘Swipe’ fees for cards questioned


A few years back, a shoulder injury sent me to a physical therapist who refused my credit card. He preferred cash or check to the “swipe” fees he’d have to pay if I used plastic for my insurance co-pay.

Such fees long have been a thorn in the side of merchants and service providers, who are charged a percentage of the full transaction plus a flat fee – together known formally as the interchange rate – to process each credit or debit card sale. The bulk of the fee goes to the companies and financial institutions that issue the cards; the hosting networks (think Visa and Mastercard) get a slice from the issuers. 

Last week, merchants got to unload about the fees before a committee of Congress looking into whether they are excessive and stymie competition. The hearing took place just weeks after Visa and Mastercard, which set the fees, rolled out adjustments delayed by the coronavirus pandemic.

Sen. Dick Durbin (D-Ill.), chairman of the Committee on the Judiciary, said the changes, which merchants will pass along in pricing, come as consumers already are grappling with high inflation. A bipartisan group in Congress had earlier asked Visa and Mastercard to postpone the adjustments, he said.

“It’s a sweetheart deal for the dominant networks, for the biggest banks, and for certain cardholders who have ritzy rewards programs,” Durbin said of the current system. “But the average small business and the consumer – they pay the price.”

Laura Karet, CEO of Giant Eagle, a supermarket and convenience store chain serving the Ohio Valley, quantified the cost of the changes for her company: $1.3 million annually. (Forbes pegged 2021 revenue for the private company at $10 billion.)

In her testimony, Karet noted that with more consumers shopping for groceries online – a byproduct of the pandemic – and having to pay with credit or debit card, “the cost of swipe fees on grocery stores is higher than ever before.”

Also invited to the hearing were representatives from Visa and Mastercard, who challenged the assumption they work together to set the fees. Rather, said Linda Kirkpatrick, president/North America for Mastercard, the companies compete vigorously with one another, with other networks (American Express and Discover, for example), and with new players and technologies (such as PayPal/Venmo, Klarna and Zelle). 

She described as “neutral” the rate adjustments just implemented by Mastercard, as some fees went up and some went down.

Durbin, whose Durbin Amendment in 2010 capped the interchange rate on debit cards – which some worry may be eyed for credit cards, too – cited statistics putting the number of debit and credit transactions at 127 billion in 2020. By comparison, cash and check transactions that year totaled just 38 billion.

“We’re becoming a nation, clearly, maybe a world, that pays with plastic,” he said.

That could explain why that physical therapist I once paid by check now accepts plastic, according to his website.

Marlene Kennedy is a freelance columnist. Opinions expressed in her column are her own and not necessarily the newspaper’s. Reach her at [email protected].

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