Why credit card charges cost grocery customers more for a loaf of bread

August 22, 2022

By Christine Pollack, Vice President, Government Relations, IMF

Did you know that it costs more to use a credit card to buy a loaf of bread at the grocery store? Sounds half-baked, right? Well, every time you use your credit card at the grocery checkout, the retailer is charged processing fees by the credit card networks, Visa and Mastercard, and the handful of major banks that issue the most credit cards in the country.

While these hidden processing fees or “swipe fees” are a cost to a grocer accepting your credit card for purchases, the fees have increased exponentially and are forcing grocers to factor this cost into the price of a loaf of bread for all customers. , regardless of how the customer pays – by credit or debit card, cash or even with a SNAP EBT benefits card.

How does paying by credit card affect the price of a loaf of bread? One of the best explainers I’ve seen lately is this great video from the wall street journal detailing how card transactions are processed, what typical fees are, and how they affect grocery store customers and food retailers (“Why Using Your Credit Card Is Getting More Expensive,” August 18, 2022).

In 2021, merchant card processing fees totaled $137.8 billion, up 25% from the previous year and more than doubling from the previous decade, according to the Nilson report. This equates to an average of $900 per American family per year. The impact disproportionately affects Americans with low incomes, those who rely on cash, and those who don’t have access to high credit card rewards. The current credit card market leaves low-income Americans paying for bloated credit card rewards that they will never take advantage of. Even the federal government and taxpayers pay higher prices for bread when a SNAP recipient checks the register.

Last month, bipartisan legislation was introduced by Senators Dick Durbin (D-IL) and Roger Marshall (R-KS) to introduce competition to the credit card market and help grocery store customers and food retailers. The Credit Card Competition Act of 2022, S. 4674, would inject much-needed competition into the market by simply requiring that a credit card have access to more than one network to route financial data on each credit card .

Currently, the Visa and Mastercard card networks, whose purpose in life is to move financial data and not to issue credit cards, set all the processing fees – the network fees that they charge merchants and the interchange fees that credit card issuing banks charge merchants. With no other networks able to compete with Visa and Mastercard, these fees are uncontrolled and cannot be negotiated by grocers of any size. If more networks were able to compete for merchants’ businesses, this competition would result in lower fees for food retailers and savings for grocery store customers.

There’s certainly good old healthy (and delicious) competition these days in the grocery bread aisle, with many brands and types of American ham sandwiches, grilled cheese, French toast… (my stomach growls). Looks like the outdated credit card market is more than ready for a slice of competition.

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