Interchange Fees Being Fought Over Hard By Retailers And Credit Card Companies

The economic crisis coupled with the credit card crisis has revealed a lot of conflicts between credit card companies and their customers. The conflict between private credit card holders and credit card companies resulted in the highly controversial Credit CARD (Card Accountability, Responsibility and Disclosure) Act. That conflict is more or less won, with credit card holders grabbing the dubious win.

Right now, another conflict is brewing. This time around, it is between the credit card companies and retailers. The center of the conflict is the interchange fee.

Interchange fees are fees that credit card companies charge on retailers whenever they accept a credit card backed transaction. Retailers are arguing that the interchange fees are too much for them. They say that these fees are too high and are a negative impact on their profits. Retailers are often forced to pass the cost to their customers instead. On the other hand, the credit card industry is arguing that they are providing a very useful service for credit card holders and retailers alike as more and more American consumers prefer to pay with credit cards. They are therefore entitled to proper compensation, they argue.

As the arguments rage back and forth between the two camps, it has been steadily escalating. Both camps have done everything they can to capture popular support for their side and discrediting the opposing side. These include buying newspaper ad spaces, making informational videos and releasing several studies and researches supporting their cause. 7 eleven, the popular national retail store chain has also embarked on petition drives in a bid to gain popular support.

According to retailers, the cost of interchange fees is second only to the cost of labor. What makes it worse is that interchange fees are non negotiable. Credit card issuers, on the other hand are arguing that retailers greatly benefit from the service that they provide and that retailers just want to use the service for free.

At the moment, there are also three bills being considered in Congress which could lead to the regulation of interchange fees for credit card transactions. One of the biggest complaints of retailers is that they are currently unable to band together and enter into a negotiation with banks for better interchange fee rates. This complaint will be addressed by the Congressional bill introduced by Michigan’s John Conyers Jr., House Judiciary Committee Chairman. A companion bill has also been introduced by Senator Richard J. Durbin. From Illinois. The third bill, introduced by Representative Peter Welch from Vermont, will allow retailers to set minimum and maximum values for accepting credit card purchases.