At O1ne Mortgage, we prioritize educating our clients about financial matters that can impact their lives. One such topic is credit card swipe fees. These fees can affect both businesses and consumers in various ways. In this article, we will delve into what credit card swipe fees are, why they are controversial, and how they can impact your finances. For any mortgage service needs, feel free to call us at 213-732-3074.

What Is a Credit Card Swipe Fee?

A credit card swipe fee is a charge that businesses pay each time a customer makes a purchase using a credit card. This fee is paid to several entities involved in processing the payment, including the credit card network, the card issuer, and the merchant’s payment processor. These fees cover the cost of securely transmitting payment information, authorizing transactions, and reducing fraud.

Swipe fees can be charged in three ways: a flat fee, a percentage of the transaction amount, or a combination of both. For example, if a business is charged a swipe fee of 3.5% per transaction, a $100 purchase would incur a $3.50 fee.

Can You Avoid Credit Card Swipe Fees?

Many businesses pass swipe fees on to customers in the form of a surcharge. If you encounter such a fee, you typically have two options: pay the fee or use an alternative payment method.

To avoid the surcharge, consider using a debit or prepaid card, as businesses are not allowed to charge a surcharge on these. Paying with cash is another option to avoid the fee.

If a business charges a credit card surcharge, they are required to inform you in advance with signage at the entry and the cash register. This allows you to decide whether to shop elsewhere or use a different payment method.

Why Credit Card Swipe Fees Are Controversial

Retailers have long battled with the credit card industry over swipe fees. While accepting credit cards can increase sales and reduce labor costs, swipe fees also reduce business revenue. The fee charged on each transaction varies based on several factors, including the card used, business type, and transaction location. This variability makes it difficult for businesses to budget for swipe fees.

Businesses cannot avoid swipe fees if they want to accept credit card payments. Many are frustrated by their limited negotiating power, as the interchange fee portion of the swipe fee is set by card networks like Visa and Mastercard and cannot be reduced. Other components of the swipe fee can occasionally be lowered depending on the payment processor.

How Credit Card Swipe Fees Impact Your Finances

Businesses are allowed to charge consumers for swipe fees, but only in certain states. As more businesses pass swipe fees on to consumers, the cost of everyday transactions becomes more expensive. Unfortunately, you may not always know in advance which businesses charge a surcharge, making it hard to budget for them.

Shoppers who use cash or debit cards can save money by avoiding surcharges. However, frequent trips to the ATM to withdraw cash could increase the amount of ATM fees you pay.

With a credit card surcharge, you know exactly how much more you’re paying. However, the cost of credit card swipe fees isn’t as obvious when businesses raise the price of their goods or services to recoup fees. Those higher costs can add up. According to the Merchants Payments Coalition, credit card swipe fees cost the average family $1,024 in 2022.

The Bottom Line

While you can avoid paying credit card swipe fees when they’re passed through as a surcharge, you can’t avoid the impact of higher prices. To optimize your spending, consider using a rewards credit card for your purchases. You won’t be able to completely avoid credit card swipe fees, but you can offset the cost with cash back, miles, and other credit card perks. If you manage the card responsibly and pay off your balance each month, it could be worth the inconvenience swipe fees can cause.

For any mortgage service needs, O1ne Mortgage is here to help. Call us at 213-732-3074 to speak with one of our experienced loan officers. We are committed to providing you with the best service and helping you achieve your financial goals.