Oh man, this is unbelievable. You’ve got the banking community, the financial community, pitted against the retail community,” says Sen. Mike Johanns (R-Neb.). “They’ve both been in my office and I’m a clear yes vote on this … so you can only imagine those who are trying to figure this out or are still on the fence. They must be getting flooded.”…
…But there has been little serious attention paid to the effects swipe fees have beyond the corporate world. Only one major economic study has attempted to quantify how much swipe fees cost U.S. consumers in terms of higher prices– a February 2010 paper by respected economist Robert Shapiro and analyst Jiwon Vellucci, which found that 56 percent of all swipe fees are passed on to consumers, raising costs for the average household by about $230 a year.
That extra $230 isn’t a burden for affluent families accustomed to paying for convenience. Still, for families living below the poverty line, that money translates into two weeks worth of groceries or the monthly heating bill.
Yet the poor have no voice in Washington. Even the Shaprio and Vellucci study would never have been conducted without major corporate backing — it was funded by Consumers for Competitive Choice, a front group for telecommunications giants, which tried to kill last year’s financial reform bill at the same time it was pushing for the swipe fee crackdown included in the bill. Consumers for Competitive Choice President Robert Johnson tells HuffPost that he commissioned the study in order to shed light on how much swipe fees were costing consumers, and insists that the group had never worked with big retailers on the issue.
Whatever the ultimate cost of swipe fees for consumers, there’s no question that the resulting higher prices hit the poor hardest of all. Affluent consumers are more likely to pay with plastic, and both credit cards and debit cards frequently come with rewards programs that bestow frequent flyer miles, amazon.com discounts, trips to Disney World and a host of other benefits upon card users. So while swipe fees cause higher prices for everyone, affluent consumers get some of that money back in the form of rewards. The result is an effective transfer of wealth from poor shoppers to wealthier consumers: stores charge higher prices for goods in order to cover higher swipe fees, and those higher swipe fees are converted into rewards programs. According to an August study by the Boston Federal Reserve, the perks associated with plastic lead to an average wealth transfer of $771 from families making less than $20,000 a year to households earning $150,000 or more.
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