Credit card fee relief for merchants being considered by the senate
The Senate is now mulling over certain reforms to free the merchants who are in a stranglehold from the credit card networks like MasterCard and Visa. Considering that most of the major bills never get to the voting part, the fact that the senate leaders would be voting on the new amendments under the senate financial reform bill could be considered an important accomplishment. Many restaurants as well as retail stores are very much concerned over the monopolistic practices of the credit card industry.
The Government Accountability Office meanwhile revealed that many of the merchants are paying a lot more in so-called interchange, fees or swipe to the credit card networks that process these transactions. The growth of this swipe fee on the transactions of the debit cards have become quite a great profit earner for large and small banks. When the customers are agreeing for a debit card transaction, the merchant is paying 75 cents for every 100 dollars worth of purchases. This particular fee is a value based calculation and not a cost based calculation.
However, there is extensive price fixing and the market can be viewed as a monopoly currently. The bill would give Federal Reserve the power to force credit card processing networks to set fees which are more proportional and reasonable considering the actual cost that is incurred while processing the payment. The debit card should be treated more like a check so that the cost of the entire transaction stays close to the cost of processing a check. This cost which is as low as 5 dollars is very less considering that for a debit card it is currently a whopping 2.15 dollars. This fee also depends on the type of retailer the merchant is and what is the type of transaction.
The new reforms are focusing only on the fee that is levied by Visa and other card networks but not issuing banks. Debit cards issued by institutions with less than 10 billion dollars in assets will not be under the purview of this regulation. The regulations would cover over 85% of the debit card markets in terms of dollars of transaction. Another reform aims to end the practice of the payment processing networks to prevent merchants from directing customers towards other payment types. That way, merchants would be able to give rebates to customers who use cards which are from other kinds of payments or networks.
