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U.S. merchant fees higher than those in other nations

By Meg C.

Recent credit card legislation sought to make credit card companies more transparent. The end result was that credit card companies can't arbitrarily raise interest rates or charge consumers hidden fees.

What about merchants? Many small business owners depend on credit card sales in order to keep their businesses thriving. Merchants are charged merchant fees in the form of "swipe charges" charged each and every time someone performs a transaction.

History of swipe charges
Swipe charges were first implemented in the United States during the 1960s to help with the cost of credit card transactions. At the time, everything had to be manually processed, and the use of a computer was minimal.

Technology has since evolved and processing credit card transactions has dramatically decreased in cost. However, swipe fees have actually increased since the 1960s. In some companies, swipe fees represent the largest non-labor operating cost.

Recent credit card reforms keep a credit card company from taking advantage of the American consumer. Reforms don't regulate swipe fees and merchant account fees. Now that credit card companies are prohibited from gouging consumers, they may be more likely to come after small businesses and those with merchant accounts.

Aren't merchant fees high everywhere?
Even though America is known as a country where capitalism is king and the cost to do business is low, our merchant fees are among the highest in the world. According to, swipe fees in the U.S. are twice as high as those in the U.K. and New Zealand, four times those charged in Australia and over six times the rates negotiated between MasterCard and the EU.

Does that sound fair? While many small businesses in the U.S. are struggling, credit card companies are taking advantage of the small business owner's dependence on credit cards as a method of payment for goods and services.

How are swipe fees so low in other countries?
If credit card companies had their way, swipe fees would be just as high in Australia, New Zealand, the U.K. and the EU as they are in the U.S. However, these foreign governments took a stand and negotiated laws that protect businesses from unfair swipe fees.

In Australia, credit card swipe fees dropped .45 percent since reforms went into effect in November 2003. MasterCard, under the pressure of the European Union, reduced its cross-border interchange rate to .3 percent in April of 2009. This is a far cry from the two percent that U.S. consumers pay.

The bottom line is that other countries ensure that their business owners are not taken advantage of by credit card companies. Never once has a credit card company voluntarily reduced their fees without pressure from a regulatory body.

How would swipe fee reform help the U.S.?
If the U.S. had swipe fee reform, a significant amount of money would be saved every year. indicates that the U.S. singlehandedly pays 60 percent of the world's swipe fees. During 2008, approximately $48 billion in swipe fees were collected in the U.S. -- $427 per household.

Reforming swipe fees would help small businesses keep more of their profits instead of sending them to the pockets of credit card companies. The only way for legislation to make way through our government is for concerned citizens to contact their representatives.

What should small business owners do?
Small business owners need to pay attention to the fees they are charged in their merchant accounts. Now that consumers aren't experiencing arbitrary fees, credit card companies will look elsewhere for this money.

In addition, send a copy of the report to your senator or congressman. Grabbing the attention of lawmakers is the only way that necessary changes will be made.

Article by Meg C.

Published: October 5, 2009

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