Though US jewelers are expecting an increase in jewelry purchases for Valentine's Day this year, they will also experience diminished profits due to banks' high credit and debit card swipe fees that merchants and consumers must pay to charge their gifts.
Ninety percent of all Americans are expected to spend around $19 billion on gifts during the Valentine Day this year, with $4.8 billion of that total to be spent on jewelry, according to the National Retail Federation (NRF) Valentine's Day Consumer Spending Survey.
By closing time on February 14th, the NRF expects that one in five Americans will have walked into a jewelry store and purchased the perfect gem for their partners.
However, the growing costs of swipe fees - what banks charge merchants and consumers to swipe their cards - is eating away at the profits of jewellers and merchants in general, preventing them from lowering prices and hiring more people.
According to the Retail Owner Institute, jewelry stores realized a 5.4 percent profit before taxes in 2014. Meanwhile, banks are marking up swipe fees by 500 percent and higher, depending on the type of card.
In the U.S., banks make about $50 billion a year in swipe fees, which are eight times higher than in Europe, states the Merchants Payments Coalition, a group comprising various US businesses fighting against unfair credit card fees and for a more competitive and transparent card system that works better for consumers and merchants alike.
The swipe fee reportedly represents the second largest expense for many merchants, especially small business owners.
In 2011, Congress reduced debit card swipe fees from 44 cents to 25 cents by passing the Durbin Amendment, which also included measures to make the bank and credit card industry more competitive. According to the Merchants Payments Coalition, the Durbin Amendment has saved consumers almost $18 billion and helped merchants create more than 100,000 new jobs in three years.