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    Credit Card Interchange War Marches On

    Banks and merchants fight to gain pubic support as government office studies the impact on the fees.

    WASHINGTON -- In recent weeks, the arguments made in the battle over interchange fees by both camps -- the credit card industry and retailers across the nation -- have grown from single-shots to a full barrage of advertisements, studies and petitions, in hopes to sway the public's support.

    Merchants argue the fees are excessive and eat into their profit margins, forcing them to pass on the cost to consumers, while card issuers contend they are providing merchants a much-needed service as more Americans choose to pay for purchases with plastic, according to a report by The Washington Post. Both sides created YouTube videos, bought newspaper ads and released studies to prove their points. And national chains such as convenience store retailer 7-Eleven embarked on petition drives.

    "It's the No. 2 cost, behind labor, in our industry, and it's nonnegotiable," Lyle Beckwith, a senior vice president with NACS, said in the report. "And as more and more people are using plastic for payment, it's getting increasingly problematic for our industry."

    Meanwhile, Congress is considering three bills that could regulate credit card interchange fees -- a charge assessed by credit card processors to the merchants that accept the cards, and generally totaling 1 or 2 percent of the total sale -- and the Government Accountability Office studies the fees, as part of a law signed by President Obama in May that bans unfair credit card industry practices, the report stated.

    Merchants want the right to band together to negotiate the fees with the banks, which they say they are not currently able to do, according to the report. One bill in Congress, introduced by House Judiciary Committee Chairman John Conyers Jr. of Michigan, would allow merchants to enter into collective bargaining agreements with banks, while Democratic Sen. Richard J. Durbin of Illinois introduced a similar companion bill, the Post reported.

    A third bill, by Democratic Rep. Peter Welch of Vermont, would let retailers set minimum and maximum amounts for credit card purchases, among other measures.

    Meanwhile, credit card Industry representatives argue merchants do have the ability to negotiate, but most choose to go with a default nonnegotiable rate. They also say merchants are trying get services that allow them to accept credit cards for free, and include guaranteed payment to the merchant, risk management protection and better record-keeping.

    "Retailers in particular benefit from the value electronic payments deliver," Denise Dunckel, a spokeswoman for Visa, said in the report. "Unfortunately some retailers don't want to pay for the benefits of electronic payments and instead have joined their large trade associations and are backing legislation that will significantly and negatively impact consumers, especially those struggling in this time of economic uncertainty."

    The card industry's Electronic Payments Coalition recently cited "key evidence" from an Australian study that it said proved consumers would be hurt by interchange regulation in the form of higher fees, fewer benefits and no savings at the cash register.

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