What Consumers Should Know About Interchange Fees

With merchants complaining about bank and credit card companies charging them with 2 percent of a consumer or credit card holder’s total amount of purchase, shoppers are asking more about the idea of interchange fees. Here are two things that credit card holders must know to understand who else are affected by the dynamics of the credit card system:

1) The research and advisory firm Aite Group’s senior analyst Ron Shevlin said that fees collected from merchants by the bank or credit card companies are justified. The argument is that having a credit card is a service done by the banks for both the benefits of the holders and the merchants receiving payment via the plastic.

The credit card system, adds Ron has costs in order to work efficiently. The costs will be the charges to the credit card holder and the merchants. The benefits, on the other hand, will be the money lent to any consumer as long as he/she has a credit card, consumers able to buy what will otherwise be difficult to purchase without the plastic, and the easy access that credit cards give, etc…

For the merchants, banks and credit card companies enumerate benefits in the form of credit cards making their holders more empowered to purchase, merchants being able to provide their customers different ways of paying—not only through cash or debit cards but also credit cards, etc…

2) Interchange fees are paid by merchants more than the consumers. The consumers already have their separate charges from the bank or credit cards companies. The merchants complaining about the 2 percent fee they remit when customer payments are done via credit cards are the ones primarily burdened.

National Association of Convenience Stores chief executive Hank Armour says that expenditures of merchants would show interchange fees on top of the list. This is followed by expenses on employee wage and compensation and even the rent.

With this in mind, consumers ask if the fees are made for them to pay. Armour says that such does not happen. For instance, Armour says, increase in prices of products does not automatically translate to merchants raising prices in order to cover for the interchange fees. Armour says that there are a lot of things affecting raising and lowering of prices and that we cannot directly correlate fluctuating prices to interchange fees.

With these two things that present the rationale for interchange fees first and the implication to the affected party next, consumers are now exposed to new dimensions in the credit card debate.