Think twice before you swipe! Every time you use a credit card, you’re being charged a hidden fee. This secret tax takes a percentage of your transaction when money is transferred from your bank account to the merchant’s account. These fees, worth $45 billion annually, land directly in the pockets of large corporations. For perspective, that’s almost as much as Michigan State’s annual budget.
As an individual consumer you end up losing an average of $427 per year, because merchants compensate for the fees by increasing their prices. In other words, the average person ends up spending more money on hidden swipe fees than they do on Christmas presents for their family.
Typical swipe fees cost you $35.58 per month, but what do you actually get? Not much. Transactions are now processed electronically, so there’s very little cost to banks and credit card companies. That means you’re just paying for the honor of using their system (and a few yachts, jets, and sports cars).
**Sad Fact: Swipe wipe fees increased by about 270% between 2001 and 2009.
How can you avoid these fees?
Pay cash. Merchants can make up to 30% higher net profits on cash transactions; which results in lower prices for consumers. Small businesses all over the country are starting to either offer discounts for cash payment or refuse to take credit cards altogether.
Cash keeps more money in your local economy, lowers consumer prices, and allows small merchants to make better profits.
Money Saving Resources
FeeFighters.com – Sometimes swipe fees are a necessary evil, but Fee Fighters can help you minimize the damage. Their service is ingeniously simple, you just provide them with basic information about your business and they help you find the cheapest services. This is one of the easiest ways to instantly improve your margins.
Dwolla.com – Want to eliminate swipe fees entirely? Dwolla offers an incredible transaction service that is moving us one step closer to a fee-free world. They process micro-transactions for free and charge a flat $.25 fee for anything over $10.
Nice article.
Don’t quite understand http://www.biztechmagazine.com/article/2012/07/swipe-fees-secret-tax-merchants-infographic however.
And a really nice infographic
NICE GRAPHIC I’m going to show that to my boss (work at ecommerce site) so he can see what’s happening.
Thx
I’ve been saying this for years — if the federal government started charging us this kind of transaction fees as a tax there’d be blood in the streets over it. I am amazed that more people do not speak out about this.
Do you know if it is better — as far as these transaction fees are concerned — if I choose the “debit” process instead of “credit” when I’m buying something with my debit card?
Hello Ruth Anne,
That’s an excellent question! Generally speaking, merchants will prefer if you pay with debit instead of credit. Debit card transactions (which require your PIN) are processed through Electronic Funds Transers (EFT). This means the money goes almost directly from your bank account to the merchant. By contrast, credit card transactions are much more complicated and can cost nearly twice as much — especially if you’re using a rewards card.
Hopefully that answers your question?
-Roderick