The Impact of Credit Card Swipe Fees on Your Finances

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Understanding Credit Card Swipe Fees

At O1ne Mortgage, we prioritize consumer credit and finance education. This post aims to provide an objective view to help you make the best decisions regarding credit card swipe fees. For any mortgage service needs, call us at 213-732-3074.

What Is a Credit Card Swipe Fee?

A credit card swipe fee is a charge businesses incur each time a customer makes a purchase using a credit card. These fees are paid to payment processors and card issuers, covering the cost of securely sending payment information, authorizing transactions, and reducing fraud. Swipe fees can be a flat fee, a percentage of the transaction amount, or both. For example, a 3.5% swipe fee on a $100 purchase would result in a $3.50 fee.

Can You Avoid Credit Card Swipe Fees?

Many businesses pass swipe fees on to customers as a surcharge. To avoid these fees, you can use a debit or prepaid card, as businesses are not allowed to charge a surcharge on these. Paying with cash is another option. Businesses that charge a credit card surcharge must inform you in advance with signage at the entry and cash register. Carrying an alternate payment method, especially when visiting businesses that commonly charge surcharges, can help you avoid these fees.

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 lower labor costs, swipe fees reduce business revenue. The fee varies based on the card used, business type, and transaction location, making it difficult for businesses to budget for these costs. The interchange fee portion of the swipe fee is set by card networks like Visa and Mastercard and cannot be reduced, though other components can occasionally be lowered depending on the payment processor.

How Credit Card Swipe Fees Impact Your Finances

Businesses in certain states are allowed to charge consumers for swipe fees, making everyday transactions more expensive. Shoppers using cash or debit cards can avoid surcharges, but trips to the ATM may increase ATM fees. Credit card surcharges are transparent, but higher prices due to swipe fees are less obvious. In 2022, credit card swipe fees cost the average family $1,024, according to the Merchants Payments Coalition.

The Bottom Line

While you can avoid paying credit card swipe fees when they are passed through as a surcharge, you cannot avoid the impact of higher prices. To optimize your spending, consider using a rewards credit card for your purchases. Although you cannot completely avoid swipe fees, 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, call O1ne Mortgage at 213-732-3074. We are here to help you make the best financial decisions.

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