Swipe fees have become an unbearable problem and have grown wildly unfair, to the detriment of retailers. Merchants in the Hoosier state have experienced an inordinately swift and severe rise in swipe fees, a charge that card-issuing banks levy against retailers every time a customer uses a debit card to make a purchase. Swipe fees [are]now one of a retailer’s highest costs of doing business. The fees now average 44 cents per debit transaction, adding up to nearly $20 billion nationwide every year.
Because the debit-card business is controlled by only two companies, they have effectively created a duopoly. They are free to set any price to their liking and are not required to negotiate that rate with any of the interested parties. Instead, merchants must accept the dictated fees or move to a cash-only business, which is utterly impractical.
Retailers are not the only group affected. The cost of swipe fees [is] passed down to the consumer. A 2010 report found that swipe fees add 1 percent to 3 percent to the price of virtually all consumer goods in the United States, including items purchased with cash. Households pay an average of $230 a year in higher prices because of swipe fees.
All manner of economic experts, including staunch anti-regulatory advocates, agree the swipe-fee system is broken and in need of government intervention. Last year, Congress passed reforms that would cap debit swipe fees at a reasonable level of 12 cents per transaction.
The big banks. have convinced a group of U.S. senators to try to kill the reforms with the bill’s effective date only a few months away. Thankfully, Indiana’s Sen. Richard Lugar supported these reforms last year. We are counting on him to continue to fight for Indiana’s small business. We hope Sen. Dan Coats and other members of the Indiana delegation will see the value of the reforms and wait to see what happens when they go into effect in July.
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Grant Monahan
President, Indiana Retail Council
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