Most consumers don't even know they're being nicked every time they swipe a debit or credit card thanks to the big banks' quiet subversion of the free market.
Banks charge the little diner downtown where you have coffee in the mornings or the gas station down the street where you fill up your tank an exorbitant fee every time you pay with a card. These "swipe fees" run as high as 4 percent, or $4 on a $100 pair of shoes or $100 worth of groceries — almost all of it profit.
Meanwhile swipe fees have swollen to many merchants' second-largest operating cost, after labor, more than rent or utilities.
Since many merchants subsist on profit margins of a percent or less, they must raise prices to make a profit and survive. That means higher prices for everybody, whether you use a card or not.
The banks can get away with this because Visa and MasterCard dominate this market and price-fix swipe fees absurdly high to attract banks to their brand. The result: Profit margins up to 10,000 percent.
Though the banks like to throw out a fog of disinformation about swipe fees, these numbers are incontrovertible. The banks can't challenge them, so they simply never mention them.
Merchants, on the other hand, compete ferociously. After all, if you don't like the price of gas posted high over your local gas station, you can drive a mile to another station.
This means consumers are getting stuck with the bill for banks' greed — $50 billion or more a year in swipe fees.
Congress stepped in and tried to do something about debit card fees, since there's little risk to the bank when you use your money instead of borrow on a credit card.
Debit reform passed Congress in 2010 and went to the Federal Reserve to write rules to implement it.
But the Fed instead acceded to the demands of the big banks to weaken reform, which is why, according to the banks' own numbers, they still average a 500-percent profit margin on debit swipe fees despite reform.
Swipe fees are so high that American merchants pay more than the rest of the world combined. The European Union reformed the fees in December for debit and credit cards, saying it was not only the fair thing to do for consumers and merchants, but would boost the EU economy too.
Canada is considering reform and even China cleaned up its swipe-fee business recently, saying it needed to lift this crushing burden off merchants to fire up its economy.
Even in its watered-down form, U.S. debit reform saved consumers almost $6 billion in its first full year, according to a study by the prominent economist Robert Shapiro, and supported more than 37,000 jobs.
And what the banks also rarely mention is that debit reform only affects the 100 largest financial institutions in the country. Thousands of smaller credit unions and banks are exempt under the law.
The fact is that the banks have grown used to a broken market, one relying on price-fixed, hidden fees from merchants and consumers. There is no other way to put it: Merchants compete in an open market; the banks don't.
Do we really want to let the banks perpetuate the kind of behavior that was supposed to have gone out with Teddy Roosevelt and the trust-busters?
The banks will keep finding all kinds of excuses to do exactly that. Don't be fooled just because the swipe fee doesn't show up on your bill. Remember this the next time you buy lunch or stop for gas and pay with a card: The merchant and you are paying far more because the banks don't compete on price.
Real market forces are needed to reform this broken system — even if the banks don't want that.
Lyle Beckwith is senior vice president of government relations with the National Association of Convenience Stores. Thinking of submitting an op-ed to the Washington Examiner? Be sure to read our guidelines on submissions.