WASHINGTON (AP) – While your heart fills with love this Valentine’s Day, your bank’s offers will swell with cash as it grabs a huge profit from each bouquet and box of chocolates you charge to your debit or credit card.
People will spend a record $19.7 billion on Valentine’s Day this year, estimates the National Retail Federation. Every time they swipe a card, the bank that issued that card charges the merchant or restaurant a “swipe fee” so huge that it raises the price of everything, even if you don’t use a card to make the purchase.
That especially hurts poor people trying to buy essentials like gas or groceries.
More than half the people surveyed said they plan to spend an average $147 on gifts for the big day, which is on Sunday. If consumers use a credit card, banks will gouge the merchant a swipe fee of up to 4 percent, or almost $6, while the bank’s cost is just a few pennies.
That soon adds up to serious money siphoned from your pockets into the banks’, and profit margins of up to 10,000 percent on credit cards – margins rarely seen elsewhere in U.S. business.
Banks get away with this because just two companies – Visa and MasterCard – dominate this business and can price-fix fees to attract banks to their brands.
This hurts merchants, especially small ones, as these fees have swollen into many retailers’ second-largest operating cost after labor; hurts consumers trying to make ends meet; and crimps our entire economy as merchants struggle to hire and expand.
Congress reformed debit cards, but the Federal Reserve still lets banks charge 500-percent profit margins. We must persuade the Fed to make swipe fees fairer and more transparent and then reform credit cards, as other countries, such as those in the European Union, have already done.
In the end, it is you – the consumer – who pays the price while banks enjoy all the perks on Valentine’s Day, and every day.