Europeans Limit Credit Card Fees

If it can work in Europe, why not in the United States?

December 08, 2015

WASHINGTON, D.C. – Using a credit card has never been easier—or more expensive for retailers. The hidden “swipe” fees banks charge merchants for processing cost around 2% per transaction, but amount to “more than $50 billion a year that gets added to the price of merchandise—$1 on every $50 purchase, or more than $400 per household every year,” writes Mallory Duncan, chairman of the Merchants Payments Coalition and senior vice president and general counsel at the National Retail Federation, in a blog published in The Hill.

This month, Europe starts “enforcing new antitrust rules that make the market more competitive and ban the type of price-fixing the card companies engage in at home. Under the new rules, swipe fees on European credit cards will be limited to 0.3% of each transaction, with swipe fees on debit cards limited to 0.2%,” Duncan wrote.

“This legislation is good for consumers, good for business, and good for Europe,” said Margrethe Vestager, European commissioner in charge of competition policy. “It will lead to lower prices and visibility of costs for consumers. It reduces a tax levied on business by banks in the form of interchange fees, and releases the brakes that have so far held back innovation.”

Here in the United States, these transaction fees have eaten away at merchant profits, becoming their “fastest-growing expense and their second- or third-highest cost behind payroll and health care. And since they are passed on to consumers, Americans pay more in swipe fees than the rest of the world combined,” Duncan wrote.

While Congress has acted to reduce swipe fees for debit card transactions, it has not addressed credit card transaction fees. “It’s time for U.S. policymakers to follow that example so American merchants and consumers can stop paying the bulk of the world’s swipe fees,” Duncan concluded.

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