This week, new laws take effect offering consumers more protection from credit-card interest rate and fee hikes. But activists say one area of profiteering in credit cards was overlooked in the Credit Card Accountability Responsibility and Disclosure Act of 2009--interchange, or credit-card "swipe" fees.
The consumer/business advocacy group Consumers For Competitive Choice released a study today by former U.S. Undersecretary of Commerce Robert Shapiro, "The Costs of Charging It" in America, which looks at the problem of excessive swipe fees.
In the nine months between passage of reform and implementation this week, the study says, banks have been busy cranking up swipe fees. In 2008 alone, banks reaped $48 billion from swipe fees, the report says, up 300 percent in less than a decade. Many merchants will tell you they often lose money on small purchases due to the size of their swipe fees.
"Every dollar spent on swipe fees is a dollar not being spent hiring employees or passing savings on to consumers," the group notes. The study's estimate: If swipe fees were cut to the level that merely covered their cost, the savings to businesses could create 242,000 jobs. Consumers would have roughly $230 more per household to spend, stimulating retail spending and leading to more hiring.
Of course, it's probably a pipe dream that the cost of processing card swipes would ever become a zero-profit activity. But if fees were simply cut to where they were just a few years back, it could remove a substantial merchant cost.
Are swipe fees a major problem, or a minor annoyance? Weigh in with a comment and let us know.