Strategies to Reduce Swipe Charges All Year Round

If customers used credit cards to purchase gifts on Valentine's Day, they probably had to pay high fees. According to a Merchant Payments Coalition report, swipe fees-which credit card issuers and issuing banks charge businesses to process debit and credit card transactions-cost customers an estimated $578 million in higher pricing over Valentine's Day.

This estimate was based on the average Visa and Mastercard rate of 2.24% used in the study. With Valentine's Day spending averaging $185.81, swipe fees costing each customer almost $4.16.

The Merchant Payments Coalition could not provide precise figures due to not all Valentine's Day purchases being made with credit cards.

Brennan Duckett, a member of the Executive Committee at the Merchant Payments Coalition, highlighted the impact of higher swipe fees on Valentine's Day expenses, particularly for restaurants. He noted that while Valentine's Day is typically one of the busiest days for restaurants, both businesses and customers are likely to face increased costs this year due to elevated swipe fees.

Duckett emphasized that soaring swipe fees have broader implications beyond dining out on Valentine's Day, affecting various purchases such as flowers and engagement rings. These increased fees ultimately drive up prices for U.S. consumers and can influence what couples can afford for special occasions like Valentine's Day.

According to the survey, online shoppers are also subject to credit card or debit card processing costs. When comparing in-store and online purchases, swipe fees are typically significantly greater.

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Federal Reserve Proposal to Reduce Swipe Fees

In October, the U.S. Federal Reserve introduced a proposal aimed at reducing swipe fees. Under the proposed plan, the current fee cap of 21 cents per transaction would be lowered to 14.4 cents per transaction, marking the first adjustment to rates since the cap's inception in 2011. The proposal is currently open for public feedback.

Austen Jensen, the executive vice president of government affairs at the Retail Industry Leaders Association, expressed support for the Fed's proposed revisions, emphasizing the potential benefits for retailers, customers, and employees. Jensen highlighted that the retail sector operates within narrow profit margins, and any opportunity to reduce costs or enhance benefits is welcomed by merchants, ultimately contributing to a more competitive industry landscape.

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Strategies to Avoid Credit and Debit Card Fees

Scan fees are often unavoidable for customers unless they use cash rather than cards. With a few easy actions, you can simply avoid several other credit and debit card fees.

• Choose a credit card without an annual fee: Credit cards do not require yearly fees. Numerous fee-free choices are available that provide incentives, balance transfers, and other valuable benefits.
• Verify that the credit card has no international transaction costs before using it: If the cardholder intends to travel, use a credit card without any foreign transaction fees. This fee can add up to significant costs for each card swipe made outside of the United States. It usually ranges from 1% to 3%.
• Choose a debt transfer credit card that doesn't charge a transfer fee: There are a few balance transfer credit cards that don't charge a transfer fee. Before selecting a credit card, be sure there are no extra costs by reading the fine print.
• Use a credit card just to withdraw cash; cash advance fees are expensive. To withdraw cash from an ATM, several credit card providers levy a fee of between 3% and 5% on average. Instead, use a debit card-ideally at an ATM with no fees.

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