Credit Card Swipe Fees Could Cost Consumers $20 Billion This Holiday Season

Talk about a staggering number.

The holiday season is when consumers tend to flock to retail stores in droves to check items off their gift-giving lists. And online sales tend to pick up during the holiday season as well.

Meanwhile, many consumers routinely do their shopping with credit cards, both during the holiday season and otherwise. Credit cards offer the convenience of not having to carry cash and getting to rack up reward points on purchases. Some credit cards even offer bonus reward points or cash back in specific categories, like gas, restaurants, and groceries.

But while it's possible that using a credit card could save you money, both in the course of your holiday shopping and everyday shopping, you might also be spending more than expected by virtue of relying on credit cards. That's because merchants pay a lot of money to be able to accept credit cards. And those fees may be getting passed along to you -- whether you know it or not.

Swipe fees can really add up

Credit card processing fees can be a huge burden for merchants -- especially these days, with those fees on the rise. In fact, the Merchants Payments Coalition estimates that rising processing fees could cost consumers more than $20 billion this holiday season.

To break that number down, consumers are expected to spend an average of $833 during this year's holiday season, according to the National Retail Federation’s annual forecast. Based on the average 2.22% processing fee rate for Visa and Mastercard, that amounts to $18.50 in swipe fees for the average consumer and could total $20.9 billion on a national level if all holiday purchases are made using credit cards.

Of course, some consumers do make a point of paying for holiday purchases in cash, so it's hard to pinpoint an exact figure when it comes to seasonal credit card processing fees. But since 81% of consumers plan to pay for holiday purchases with a credit card this year, it's fair to assume that seasonal swipe fees will be substantial.

Also, while the average credit card processing fee may be 2.22%, some premium cards can impose a swipe fee of 3% or more. And that translates to $25 in added costs during the holiday season.

You're probably paying that fee either way

Some merchants have adopted the practice of passing credit card processing fees onto consumers directly. In fact, you'll commonly see signs posted in restaurants and small retail shops explaining that non-cash purchases will incur an additional charge, often for spending under a certain amount.

But even if you're not facing a direct fee for using a credit card, you may be paying more by virtue of higher-priced items. Some merchants, rather than pass processing fees onto consumers, will simply mark up the prices of what they're selling to compensate. So while you may not see a 2.22% surcharge on a given item you purchase, you may be paying 2.22% more for it via a higher price tag.

Know when cash pays off

If you're still in the process of doing holiday shopping and come across merchants who expressly pass credit card processing fees onto consumers, you have a prime opportunity to avoid those added costs by hitting up the ATM and paying for your purchases in cash. But in some cases, you don't get a choice when it comes to absorbing credit card fees. And so you'll need to budget carefully at a time when you most likely have lots of purchases to make and prices are higher than average.