Credit card fees: How would you vote?
Proposed legislation would limit how much credit card companies can charge merchants who accept their cards. Is this a good thing?
Every now and again, the credit union sends out a mass e-mailing to lobby members to ask elected representatives to vote this way or that on matters that affect credit unions in specific and banking in general. Normally I think: Yup yup yup! What's good for my credit union is good enough for me -- and I do as I'm told. This time, though, they're asking us to weigh in on the "interchange legislation" that is part of the proposed Financial Regulatory Reform Act.
And I'm not so sure.
We're told in the e-mail:
A new amendment under consideration by legislators will benefit merchants and soon you could be paying more to use your debit and credit cards. Merchants are asking legislators to reduce their fair share of the cost of the card payment system.
If they are successful, merchants will:
Dictate which debit and credit cards they will accept and where they will be accepted.
Limit your ability to choose your preferred payment methods.
Be allowed to set minimum and maximum amounts for credit card purchases.
These changes could result in higher costs at checkout, and fewer rewards and benefits for your debit or credit card. You can protect your preferred method of payment by acting now!
Oh. Eeek. I'm afraid. I'm very afraid.
This bit of slippery-slope logic led me to wonder what on earth they're going on about, so I hit the link to the boilerplate they would like us to send to our legislators. There the proverbial plot thickens.
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There we're told that the new legislation would include "a provision that would mandate price controls on the interchange fees paid by merchants for accepting debit cards. This bill has unintended consequences for credit union members and every consumer with a debit card in his or her wallet."
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Price controls on "interchange fees": What we're talking about here is the amount that retailers have to pay for the privilege of letting you and me rack up our purchases on credit and debit cards. This can be a significant zing. The charges vary from card to card, which is one reason that a lot of vendors won't accept American Express -- it's mighty expensive.
Soooo, the questions are these:
- Is what's good for my credit union good for me? And you?
- Should there be no cap on the amount banks are allowed to require merchants to pay just because their customers think it's handy and dandy to rack up debt on credit cards and overcharges on debit cards? (Or not: Some of us don't charge up more than we have in the bank in any given month … but still!)
- Why should a merchant have to pay for our convenience, especially when the purveyor of our convenience is making a freaking ton of money off of us?
- And what happens when your grocer, your toy store, your veterinarian, your clothing shop has to pay Visa, MasterCard, or American Express so that you can use Visa's, MasterCard’s, and American Express’s startlingly profitable plastic?
Oh, yes: We do know what happens. The cost gets passed along to you and me. Everything we buy from retailers across the nation and around the world costs more because we're paying the surcharge in the form of higher prices at the checkout stand.
If the Safeway gave me a discount for buying a week's groceries in cash, I would cheerfully break out a fistful of dollars or write a check. If Chuck's Auto Service would exempt me from interchange fees if I paid cash, I would be mighty happy.
All right. All right. Debit and credit cards are very handy, and I admit to using my AmEx card because it is just downright convenient. I don't like to carry cash around. Having been robbed once, I know I can't collect for lost cash from my insurance policy, and I know my losses from a stolen credit card are capped at $50. Very nice. And I do hate dorking around with writing a check and jumping through the merchant's check-cashing hoops every time I make a purchase.
What about that kickback I'm getting from Costco's American Express card? It amounts to 3% for gasoline charges, 3% for restaurant bills, 2% for travel costs, and 1% for everything else, like the grocery store.
Well, I hardly ever go out to eat, and I never travel. So it wouldn't harm me to pay cash for restaurant meals and grocery bills, especially if I got a 1% to 3% discount for doing so. Because paying cash at a gas station is a hassle, I'd probably still charge gasoline, unless the cash discount were significantly more than 3%.
But if this legislation were to put credit card issuers out of business -- that's not going to happen -- do I care? Will my world end if I have to write a check or pay with actual dollars for everything? Well, in a word, no.
How do you feel about this matter? Do you think credit card issuers should be allowed to continue the status quo?
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