If there is anyone working in retail today who doesn't want to strictly limit what banks and card companies can charge for interchange fees, then they must be the only ones we haven't heard from on the issue. Over and over again we've heard that the fees represent a hardship for merchants and, ultimately, consumers because they cause the cost of goods to go up.
Senator Dick Durbin offered an amendment to the financial reform legislation in Congress that is widely supported by the retail industry. Upon passage of the measure in the Senate last month, Sen. Durbin wrote, "Passage of this measure gives small businesses and their customers a real chance in the fight against the outrageously high 'swipe fees' charged by Visa and MasterCard. It will prevent the giant credit card companies from using anti-competitive practices, allow merchants to offer discounts to their customers and restore common sense and fairness to this broken system."
The banking and card folks counter that the fees are legitimate and that eliminating them would mean that consumers would have to pay annual fees or incur some other type of charge to make up the difference. In essence, the amount consumers pay will not change, but where they take the hit will.
In a letter to Sen. Durbin, MasterCard CEO Robert Selander wrote, "The decrease in merchant acceptance fees which would result from your amendment would simply be borne by consumers -- and at a time when consumers are struggling from the steep recession and trying to regain some degree of spending power."
Discussion Question: What will the net effect of interchange fees dropping be for retailers and consumers?
[Editor's Note] A report by the Treasury Department estimates that the federal government can save $39 million a year by negotiating lower fees on card transactions.