The recent passage of the credit card bill from Congress was cause for celebration for credit cardholders, though the legislation itself won't become active until nine months have passed. Now, the government is looking into other credit card practices that seem unfair to consumers and how best to legislate them.
Currently, the Government Accountability Office is studying credit card usage among American consumers. They are interested in one particular practice and its effect on merchants and credit cardholders: interchange fees.
Interchange fees are fees that merchants pay whenever a customer uses a credit card. Essentially, when a merchant's customer uses his or her plastic to purchase an item, the bank of the merchant pays an interchange fee to the bank of the credit cardholder so that the transaction goes through. This is true not only for credit cards but also for debit cards as well. The interchange fee for every transaction is usually at 1% to 2% of the total amount of the credit cardholders' purchase. Thus, for a transaction of $100, the merchant has to pay anywhere from $1 to $2.
Most people take interchange fees for granted, as they are often buried within their transactions. However, some are taking keen interest in them. Consumer advocates are very much aware of how much interchange fees affect daily purchases of credit cardholders. Merchants are also quite aware of them, being the group who has to shoulder the payment or pass it on to their customers. The credit card companies are also very much aware of the profits that they are getting from interchange fees. Although a 1% charge may seem minimal to the regular consumer, it can mean millions to a credit card company that sees profit from it from thousands of credit card transactions every day.
The recently passed Credit CARD bill (Credit Card Accountability, Responsibility and Disclosure Act) actually has a provision that can be used to address interchange fees. The provision requires investigation on fees that merchants have to pay so that their customers can use credit cards. The main thrust of the provision is to provide disclosure to consumers on the credit card industry's practices.
Some have noted, however, that disclosure is not enough for change to happen. Although informing credit cardholders of credit card industry practices seems like a good first step, there is still a need for stronger legislation. It ultimately depends on whether there is a change in the way credit cardholders use their credit.