The biggest crock of a credit card fee
Greetings! We all know that credit card companies and banks relish in collecting fees, fees and more fees, but do you really know the extent of all the fees involved? Some, like late fees, are in your face but others, such as interchange fees, go unnoticed while the credit card companies reap the benefits and take the unassuming consumer along for the ride.
To clarify, credit card companies require they take a flat fee plus a percentage (2-3%) off of each purchase from retailers. This interchange fee hurts the consumer in the way of higher prices. It’s basically a secret surcharge the credit card companies don’t want you to know about because it’s one of their biggest money makers. The Washington Post has a story in today’s paper:
The card companies (and banks that issue the cards) say the fee is fair and necessary to cover both the cost of processing and of popular bonus programs that the cards often feature. Retailers and other businesses required to pay the fee say the amount is too high, violates antitrust laws and often all but erases their narrow profit margins.
The second sentence is the kicker. By controlling about 80 percent of the market, Visa and MasterCard have a monopoly on the entire system. They set the interchange fees in secrecy, without any input from retailers or the general public. This is the key point of contention for retailers. In the spirit of full disclosure, I am working with the Merchants Payment Coalition to raise awareness and shed some light on the interchange fee and how it impacts every consumer in America.
In recent weeks, Congress has been actively holding hearings to address the credit card industry’s policies and practices. Senator Dodd held the first hearing in late January and Senator Levin held one of his own this month.
Dodd said in a statement about interchange fees:
“These opaque fees, assessed on merchants, are passed on, in part or whole, to consumers who have no knowledge or understanding that a fee is even a part of the cost of bread or milk, or any other consumer product. I believe that this is another area that this Committee should examine.”
With the threat of this new congress looking into their business practices, maybe the card companies will be willing to provide more transparency. Yes, Citibank already has changes underway but the industry isn’t budging on the interchange issue. We need to continue to pressure congress and educate members on the impact these fees have on both rich and poor.
I would love to know your thoughts on the matter.