Back-to-School Shoppers Gave Banks $27 in Debit Swipe Fees
By: Brian O'Connell

NEW YORK (sbup) — Parents laid out some real dough for 2014 back-to-school shopping — $669 per family, according to the National Retail Federation. That's up 5% from last year.

But did you know that $27 of that goes straight to banks in the form of bank card "swipe fees" for consumers using debit cards?

Swipe fees are "hidden" charges incurred by shoppers who use debit cards at retail stores. Retailers pay banks a fee for debit card payments, often up to 3% of the purchase value. In many cases, stores pass the costs of those fees along to consumers in the form of higher prices, raising the price on items such as clothes, books and phones and tablets.

According to the Washington, D.C.-based Merchants Payments Coalition, bank profit margins on swipe fees can be as high as 10,000%.

Retailers, on the other hand, squeeze by with much thinner profit margins of 1% to 2%, the MPC says.

With margins that slim, retailers have no other option but to raise prices, ensuring consumers pay more than they need to for "everything from gas to groceries," as the MPC puts it.

From the banks' point of view, they are proving a convenience to merchants and shoppers in the form of bank debit cards, letting shoppers avoid carrying large sums of cash around or preventing them from using high-fee or high-interest credit cards. For merchants, bank debit cards are an easy form of payment that makes the shopping experience easier for consumers - and improving the shopping experience is job one with any retailer.

For consumers caught in the middle, their options are limited too.

Using cash to pay for goods and services won't really change the prices retailers charge, and using credit cards to shop can add to household debt levels if consumers aren't careful.

Then there's that convenience factor. Will consumers mind paying an extra $3 for every $100 they spend on school supplies?

Only if there's an alternative. The 2012 ath Power Consulting survey says http://www.athpower.com/news/20121218.php consumers view high fees as one of the main reasons to switch banks.

—For more ways to save, spend, invest and borrow, visit MainStreet.com.

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