Credit Card charges en zo

[Cees Binkhorst]

REPLY TO: D66 at nic.surfnet.nl

Het gaat toch langzamerhand de goede kant op in de USA ;)

Overigens zijn alle krachten in de EU kennelijk juist de andere kant op
gericht.
Hier wordt uit alle macht gewerkt aan een systeem om juist dit soort
dingen in te voeren.

Groet / Cees

April 21, 2010
Op-Ed Contributor


  Our $48 Billion Credit Card Bill

By ALBERT A. FOER

Washington

THESE days, it’s hard to find anyone who doesn’t use credit and debit
cards regularly — they’re convenient and compact and often come with
small cash-back incentives.

But what almost no one realizes is that those benefits are far
outweighed by an implicit transaction fee, set by credit card companies
and their issuing banks, that costs consumers more than $48 billion a
year. As Congress works toward passing consumer financial reform
legislation (http://www.reuters.com/article/idUSN2011089420100420),
<http://www.reuters.com/article/idUSN2011089420100420> it should include
new rules about how — and how much — credit card companies can charge.

The credit and debit card system is dominated by two companies, Visa and
MasterCard, respectively accounting for 47 percent and 35 percent of the
general purpose credit card market in 2008. While those firms handle the
transactions, they depend on banks to issue the cards to consumers. The
result is that Visa and MasterCard compete to deliver the highest
returns to the banks rather than offer the lowest prices to consumers.

Card companies generate those returns by charging an “interchange fee”
for every credit or debit transaction they run — when a merchant accepts
your card for a $100 item, it gets approximately $98 in payment. These
costs are passed on to all consumers — even those who pay by cash — in
the form of higher retail prices.

None of this is new or controversial information; you can find it in a
recent Government Accountability Office report to Congress
(http://www.gao.gov/new.items/d1045.pdf).
<http://www.gao.gov/new.items/d1045.pdf> What is less well known,
however, is that many countries have instituted consumer protections
against such hidden taxes, while the United States, which has some of
the developed world’s highest interchange fees, has left them completely
unregulated.

True, there’s an antitrust class action suit by merchants pending, but
its resolution is a long way off and it’s unclear if or how it would
benefit consumers. And while several legislative proposals are sitting
patiently in Congress, they would at best only chip around the edges of
the problem.

Instead, Washington should take two straightforward steps.

First, Congress should recognize the obvious: debit cards, whose use and
fees are growing at a rapid rate, are actually no more than plastic
checks. Congress and the Federal Reserve do not allow banks to charge
their customers a percentage of each check, and it should put the same
restriction on debit cards.

Second, Congress should authorize the Federal Reserve to limit credit
card interchange fees to their actual cost, fairly determined, plus a
reasonable profit. The annual savings to merchants would be in the tens
of billions of dollars. Since retailing is highly competitive, most of
these savings would be passed on to consumers in lower prices or in the
form of improved services by retailers that could afford to hire more
people.

How can we be sure this would work? Because other countries have already
done it. In Australia, for example, regulation brought the credit card
interchange rate down from .95 percent to .50 percent — compared to our
approximately 2.0 percent. Five years of experience has confirmed that
the payments system works fine; in 2008, the Reserve Bank of Australia
estimated the savings during the previous year to have been around 1.1
billion Australian dollars (approximately $1 billion).

If the United States were to reduce the interchange rate from 2.0
percent to 0.5 percent, the savings would be $36 billion per year, less
some relatively small offsets.

Not only would such savings make our retail payment system more fair,
but it would represent a significant economic stimulus at a time when
consumers are just starting to spend again. And best of all, it wouldn’t
cost Washington a thing.

Albert A. Foer is the president of the American Antitrust Institute.

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