- Retailers and Credit Card Issuers Continue to Fight Over Interchange Fees
- October 20, 2009 | Author: LeAnders L. Jones
- Law Firm: Frost Brown Todd LLC - Office
With the recent passing by Congress of credit card legislation limiting credit card fees and interest rates, retailers are hoping Congress will also pass legislation regulating interchange fees. Interchange fees, which are the fees credit card issuers charge retailers every time a customer pays for purchases with a credit or debit card, range from two to three percent of the amount of the charge. The amount of such fees depends on where the card-user shops, what kind of debit or credit card is used, and how much the card-user spends. The fees generate an estimated $40 billion to $50 billion in income annually for credit card issuers.
Although the two sides have been fighting for several years over these fees, both sides have stepped up the battle by using TV ads, newspaper ads, and even YouTube attack videos to garner support for their position. Retailers argue that with the more widespread use of credit and debit cards and with credit and debit cards being increasingly used to make purchases for small items, such as donuts and coffee, the unnecessary fees cause them to lose a substantial portion of their profit margin. They say that this, in turn, causes them to have to pass on the charges to their customers. Credit card issuers argue that the fees cover the risk that the card-user will not pay and that retailers need to pay their fair share for the payment system to function.
Currently, there are a number of bills in Congress that address the issue. However, it appears unlikely that legislation addressing interchange fees will pass this year. This is because Congress is faced with more pressing issues, such as healthcare reform, and the conflict between retailers and credit card issuers is viewed as a business-to-business issue rather than a consumer issue, which would make broad political support difficult.