Credit Card ‘Swipe’ Fees Account for $3 Billion of Back-to-School Costs This Year

Swipe fees increasing back to school costs.

“Swipe” fees banks charge merchants to process credit card transactions will drive up the price of school and college supplies by more than $3 billion this year and cost the average family between $20 and $30, the Merchants Payments Coalition said today.

“Spending on school supplies helps children get an education, but the biggest lesson parents will learn is that swipe fees are astronomically high and make everything more expensive,” MPC Executive Committee member and National Association of Convenience Stores General Counsel Doug Kantor said. “Swipe fees add to the cost of school, whether it’s a lunchbox in first grade or a laptop in college. Congress needs to bring competition to the broken swipe fee market.”

Swipe Fees are High Operating Costs for Merchants

Averaging 2.24 percent of the transaction but ranging as high as 4 percent, swipe fees are most merchants’ highest operating cost after labor and have to be built into pricing. With few consumers using cash and credit card rules making discounts difficult, all shoppers pay more because of swipe fees regardless of how they pay.

Breakdown of Back-to-School Spending

Families are expected to spend an average $890 on K-12 school supplies, clothing, and related items for a record $41.5 billion this year, according to the National Retail Federation. While a precise amount is difficult to calculate, MPC estimates that swipe fees account for just under $20 of the per-family cost and $929.6 million of the total.

Back-to-college spending is expected to average $1,367 with a total of $94 billion, resulting in swipe fees of just over $30 on average and $2.1 billion overall. Together, back-to-school and back-to-college swipe fees could amount to just over $3 billion.

K-12 families are expected to spend on average $140 on school supplies like pencils and notebooks, including about $3 in swipe fees; $325 on electronics like calculators, or more than $7 in swipe fees, and almost $425 for clothing and shoes, including almost $10 in swipe fees. For college, spending should average $78 for college-branded gear (including $1.75 in swipe fees), $95 for school supplies ($2), $190 for dorm furnishings (about $4.25), $295 for clothing and shoes (nearly $7) and $337 for electronics ($7.50), among other expenses.

The $20 in swipe fees for a K-12 family is equal to the cost of a school lunchbox, while the $30 college average would buy a backpack.

Swipe Fees are Doubling

Swipe fees have more than doubled over the past decade and rose $22 billion last year to a record $160.7 billion when debit cards are included, driving up prices by more than $1,000 a year for the average family.

The impact on school spending comes as Congress is considering the Credit Card Competition Act, which was reintroduced in June by Senators Richard Durbin, D-Ill.; Roger Marshall, R-Kan.; Peter Welch, D-Vt., and J.D. Vance, R-Ohio, and by Representatives Lance Gooden, R-Texas; Zoe Lofgren, D-Calif.; Thomas Tiffany, R-Wis., and Jefferson Van Drew, R-N.J.

Visa and Mastercard – which control 80 percent of the market – currently price-fix swipe fees charged by banks that issue cards under their brands, and also block transactions from being processed over other networks that could do the job with lower fees and better security. The legislation would require banks with at least $100 billion in assets to enable cards they issue to be processed over at least two unaffiliated networks – Visa or Mastercard plus a competitor like NYCE, Star, or Shazam. That would make networks compete over fees, security, and service and is expected to save merchants and their customers $15 billion a year.