Merchants Say Credit Card Fees are Helping Drive Thanksgiving Inflation

MPC

WASHINGTON, November 22, 2021 – As Americans prepare to spend a record amount on Thanksgiving dinner and travel this year, credit card “swipe” fees will contribute significantly to the inflation seen in costs for the holiday, adding millions of dollars to prices paid by consumers, the Merchants Payments Coalition said today.

“Consumers are spending more than ever this Thanksgiving, and credit card fees are a big part of the reason,” MPC Executive Committee member and National Association of Convenience Stores General Counsel Doug Kantor said. “Whether it’s the turkey on the table or the gas and airfare it takes to get home, credit card fees are driving prices even higher, and the card industry sees an unearned windfall every time prices go up.”

Unknown to most consumers, banks and card companies take a percentage of the total in “swipe fees” every time a credit card is used to make a purchase, and merchants receive less than 98 cents on the dollar on average. As prices go up, the dollar amount the card industry collects goes up with them, becoming a multiplier effect that drives inflation even further. The fees come to tens of millions of dollars for Thanksgiving alone and more than $100 billion a year. With the fees representing many merchants’ highest cost after labor and most consumers paying by plastic rather than cash, the fees have to be built into prices and cost the average family hundreds of dollar a year even if they pay with debit cards, which have lower fees, or cash.

While an overall total is difficult to calculate, swipe fees touch every aspect of the Thanksgiving celebration.

Groceries for a home-cooked Thanksgiving dinner for 10 will average a record $53.31 this year, up 14 percent from last year, driven by a 24 percent increase in the price of the average 16-pound turkey (now $23.99), according to the American Farm Bureau. With swipe fees for Visa and Mastercard credit cards averaging 2.22 percent, card fees account for $1.18 of the total – including about 50 cents for each turkey. Based on per-pound prices and average weights, fees equal the cost of the wings on the turkey.

Food and agriculture economist Jayson Lusk points out that the Farm Bureau estimate doesn’t take into account rising wages – the median worker had to put in only about an hour and 15 minutes to buy a 20-pound turkey as of 2019 compared with nearly three hours in 1980. But swipe fees get collected on the purchase price either way.

Lending Tree sets the estimate for dinner far higher, saying those throwing an at-home Thanksgiving party for 10 spent an average $343.26 on food and drink last year, which would result in $7.62 in swipe fees. For the gourmet-minded, high-end restaurants can charge $80 or more per person, costing a party of 10 $800 – including $17.76 in swipe fees. That doesn’t include tips, which are also subject to swipe fees if charged.

Americans will spend $927 million on turkeys alone this Thanksgiving, according to research website Finder. Based on that amount, credit card fees would make up $20.6 million of the cost.

Dinner isn’t the only cost of celebrating Thanksgiving. An estimated 48.3 million people are expected to drive to their destinations, and the average cost of a gallon of regular gas is currently $3.41 per gallon, according to AAA. That means swipe fees amount to 7.6 cents per gallon, adding more than 75 cents to a 10-gallon fill-up. The number is up from 4.7 cents a year ago when gasoline averaged $2.12 and means the card industry will make more than the local gas station owner – fuel industry pretax profits average less than 6 cents per gallon.

AAA says daily car rental rates are up 4 percent from last Thanksgiving, averaging $98, which would make the swipe fee $2.18 per day. The average mid-range hotel is up 39 percent, ranging from $137 to $172 per night, or as much as $3.82 in swipe fees.

Airfare for a domestic round-trip flight will average about $300 this Thanksgiving, up 23 percent from last year, according to travel app Hopper, and swipe fees would account for $6.66 of the ticket price. With the AAA expecting 4.2 million people to travel by air over the holiday, that’s about $1.3 billion in airfare, including about $28 million in fees.

The large increases in Thanksgiving costs come amid soaring inflation driven by consumer demand and supply chain disruptions during the pandemic. The Consumer Price Index was up 6.2 percent year-over-year in October, the largest increase since December 1990, according to the federal Bureau of Labor Statistics.

About MPC
The Merchants Payments Coalition represents retailers, supermarkets, convenience stores, gasoline stations, online merchants and others fighting for a more competitive and transparent card system that is fair to consumers and merchants.