Credit Card “Swipe Fees”: The Four-Letter Word

Although the term “swipe fee” is likely unfamiliar to consumers, for merchants paying credit card transaction fees it’s considered a “four-letter word.”  Swipe fees are charges paid to credit card companies every time a consumer uses a credit card.  In 2017, merchants paid over $43 billion in “swipe fees.”  Ranging from 1% of the transaction to 5% for some specialty cards, the fees average $0.23 per transaction and are higher for “card not present” sales such as website or telephone transactions.  While merchants theoretically pay these fees, the costs are ultimately passed on to consumers by way of higher prices.  Until late 2018, Texas state law prohibited merchants from passing the “card not present” surcharge to their customers.  However, after the United States Supreme Court held a similar anti-surcharge law unconstitutional, a Federal Court in Texas held the Texas law similarly flawed.”


Although Texas merchants may now add a surcharge for each credit card purchase, the ability to add the surcharge is not without Federal regulations: 

  • Merchants may not add a surcharge to any purchase using a debit card. 

  • The surcharge may not exceed the cost charged to the merchant and may never exceed 4% of the total transaction.  

  • A sign disclosing the surcharge must be present, and the surcharge must be included on the customer’s receipt as a separate line item. 

  • Different surcharges may be charged for different types of cards, assuming all other regulations are followed.

  • Visa, Discover, and MasterCard must provide consumers thirty-days’ notice in advance of adding a surcharge. 


Even with the additional requirements, the ability to pass on these substantial costs is worthy of celebration for merchants.  Theoretically, prices previously-inflated to cover “swipe fees” should decrease.  In reality, however, the only difference the average consumer is likely to “see” is the actual fees being paid to credit card companies included on the receipt.