I raised the issue of interchange fees a while back here and am still working with the Merchants Payment Coalition (MPC) to raise awareness of this problem.
A quick refresher . . . interchange is a percentage of each transaction that Visa and MasterCard banks collect from merchants every time a consumer uses a credit or debit card to pay for a purchase. These hidden interchange fees drive up the cost of goods and services for all consumers whether they pay with plastic, cash or check. Plus, at $36 billion last year, interchange is the largest fee, more than the total amount of penalty fees and ATM fees combined.
On the credit card company front, MasterCard just announced their first quarter profit climbed 70% to a record of $215 million. Additionally, Visa recently raised interchange rates . . . again. Remember, someone has to pay for those "free" rewards programs and for all those pre-approved offers, and we do through interchange fees.
Now, here is what is being done about interchange fees. There are some great efforts being made at the state level to address interchange with 15 bills to regulate payment card acceptance fees and practices being introduced in nine states during the last few months. As this article from American Banker notes [subscription required],
In Washington, for instance, state Sen. Ken Jacobsen sponsored four bills that did not make it to the floor for a vote during this year's legislative session, which ended April 22. In an interview last week, the Seattle Democrat said he will work to build support for the proposals and then fight for them when the next session opens in January.Interchange is "a growing issue," Sen. Jacobsen said. "There doesn't seem to be any force to keep it down."
The card industry is "a duopoly," he said. "If you're in a [retail] business, you've got to take the credit card."
One of Sen. Jacobsen's bills would prohibit charging interchange on the sales tax portion of a transaction. Another would require the state to reimburse merchants on any interchange fees they pay on the sales tax to banks. A third bill seeks to cap interchange at 1.5% of the total transaction.
Sen. Jacobsen said he proposed multiple bills because he is trying to find any remedy he can for small businesses. If the state had to reimburse merchants for interchange on sales tax, the amount would total $78 million a year, he said.
Did you catch that, yes interchange is charged on not only the total sales price of an item but on all applicable taxes as well. This further inflates the price of consumer goods and amounts to a tax on a tax.
On the national level, as I mentioned in my previous diary, Senator Dodd has already held hearings and warned the credit card industry, stating, "If you currently engage in any business practice that you would be ashamed to discuss before this committee, I would strongly encourage you to cease and desist that practice." There will be additional hearings in both the Senate and House this year and more members of Congress are rallying to the cause, as is noted in this great op-ed from Rep. Allyson Schwartz (D-PA),
Please feel free to visit us at www.unfaircreditcardfees.com to learn more and help fight for full disclosure, transparency and competition in the credit card industry. It's difficult to keep this issue in the forefront when the credit card companies try their best to disclose as little information as possible so we need your help. Thanks.