There's a new bill before Congress designed to help deal with one of the many fees tethered to all major credit cards. The new legislation addresses rising interchange fees, which are ultimately passed on to consumers in the form of higher prices for goods and services, whether the consumers purchase items via credit card, check or cash.

On March 7, Rep. John Conyers (D-Mich.) and Rep. Chris Cannon (R-Utah) introduced the "Credit Card Fair Fee Act," which would allow merchants to negotiate with the dominant banks for the terms and rates of the fees.

Every time a consumer uses a credit or debit card the merchant is charged a fee by the banks that issue the card. The interchange fee covers processing fees, fraud protection, billing statements, and other expenses such as system innovations. This fee gets divided up between the merchant's bank, the consumer's bank, and the credit card company.

Almost 90 percent of this fee is comprised of a so-called interchange fee, a payment made by the merchant's bank to the consumer's bank. The percentage is set by the credit card companies and averages 1.75 percent of the total purchase. According to the National Retail Federation (NRF), in 2006, retailers paid Visa and MasterCard banks interchange fees totaling approximately $36 billion.

The Credit Card Fair Fee Act aims to introduce competition into the current system by allowing market negotiations between Visa and MasterCard and merchants, and establishing a fair way to decide disputes. The goal, says the Merchant Payments Coalition, is to have a system that will lead to negotiated market rates that are competitively set.

SAF is a member of the Merchant Payments Coalition, which is working to gather additional co-sponsors for the legislation. To read more about the legislation go to unfaircreditcardfees.com.

--Morgan Schimminger
mschimminger@safnow.org

 

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