Why a crackdown on credit card interchange fees won't happen

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Mogul of Pineapples
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Why a crackdown on credit card interchange fees won't happen

Postby Mogul of Pineapples » Mon Dec 06, 2010 5:09 pm

There has been some talk of credit cards going the wayside now that merchants can openly encourage customers to pay using cheaper methods, like cash.

I doubt we will ever see a full crackdown on credit cards by the government because it is in their best interest to keep card usage high. The more transactions made with cards, the less unreported business income we see. Mom and pop businesses can't lie about revenue if it's all documented electronically. This is why I believe the government will do its part to allow card usage to prosper, by not cracking down on transactions fees. If they did that would mean less rewards and hence less motivation for us to use plastic over paper.

Ultimately it's in Uncle Sam's best interest for us to use cards.
Disclosure: I am a moderator/paid staff of this site, which does have advertising relationships with some credit cards that are discussed and linked to. Regardless, anything I say is my honest opinion.

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jeffysdad
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Postby jeffysdad » Mon Dec 06, 2010 5:33 pm

That's an excellent point, MoP. As one who prefers to use a credit card for everything, I hope you're right. However, pin-based debit is cheaper for merchants and offers the same facilities for tracking transactions.
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Postby infomaniac » Fri Dec 10, 2010 11:32 pm

Frankly I never understood the concept that government ought to butt into the business of interchange fees. American should be a free market society and the amount of fees are not the government's business.

There are four major credit cards, more diversity than seen with computer operating systems or major search engines. Many sectors have no more than two or three dominant names. It's easy to to gang up on credit cards but this industry is no better or worse than any other.

jeffysdad
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Postby jeffysdad » Sat Dec 11, 2010 7:52 am

My limited understanding of the recent CC reforms is that merchants now are allowed to charge a fee for accepting credit cards if they desire. That is to say, the CC companies can't require merchants to agree not to charge a fee as they did in the past when merchants could only offer discounts for cash. If you lived in my neighborhood and liked to drink, you'd have seen two examples of how this works.

Liquor store No. 1 has always offered 5% discount for cash or debit. It's the only place I use my debit card. I've almost never seen a customer in there pay with credit. Some beer and a few bottles of wine can run $100 easy, and 5% of that is, of course, five bucks, or a pack of smokes for some.

Liquor store No. 2 is the immigrant-owned Mom & Pop. They always used to have a little handwritten sign on their register saying that a fee would be charged for CC purchases under $10 or $20 (I forget which). This was clearly in violation of the agreements they signed with the CC companies, but I don't think it was "illegal." However, I noticed that after the reforms they took the sign down. When I was in the store buying a six-pack I asked if they still charged the CC fee and the clerk (Mom) said yes. I asked her if a fee would apply if I used my debit card and could not get a straight answer from her. I paid with cash and left the store -- for the very last time.

I don't think govt. can or would dicker with interchange fees to any significant degree. If there is going to be change on this front, it will be led by merchants (the CC companies made the status quo and like it fine). Activist merchants will either pick up a carrot (liquor store No. 1) or a stick (store No. 2). In the end, as always, consumers will decide.
American Express: Blue Cash Preferred (groceries, 6%; gas, department store, 3%); Gold Delta SkyMiles (Delta Air Lines, 2 miles/dollar, free checked bag).
US Bank: Cash+ (utilities, phone, internet, restaurant, 5%; drugstores, 2%).
FIA Card Services: Fidelity Amex (everything, 2%); Fidelity Visa (everything, 1.5%).
Chase: Freedom (rotating, 5%); Amazon (Amazon.com, 3%); PriorityClub (IHG hotels, 5 points/dollar); Sapphire (not in use).

*All cards are registered with PriorityClub IDine program for 8 points/dollar at participating restaurants.

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Mogul of Pineapples
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Postby Mogul of Pineapples » Thu Dec 16, 2010 2:23 am

A 5% discount is more than the interchange fees assuming the purhcase was about $10 or higher. The only valid reason I can think of for offering that high of a discount is if the store owners don't like credit card transactions because it's income that must be reported.

I recept the hardworking immigrant business owners in America but for their own good they should work on learning our culture better- Americans hate fees and customers will be turned off by charging them.

That's right it will be consumers deciding and as long as I am earning 1.5% to 5% cash back there will be little chance of me favoring businesses like liquor store #1 or #2. Unless liquor prices are state controlled you're better off going to Costco for liquor and on-sale beer at CVS. Then throw your 5% drugstore cash back credit card in for the purchase and you will be coming out way ahead.
Disclosure: I am a moderator/paid staff of this site, which does have advertising relationships with some credit cards that are discussed and linked to. Regardless, anything I say is my honest opinion.

Current Cards:
American Express: Blue Cash, Simply Cash Bank of America: WorldPoints Platinum Plus Chase: Amazon, British Airways, Cash Plus Rewards, Freedom, Ink Cash Citi: Thank You Premier, Dividend Platinum Select Discover: More
Primary Everyday Card: American Express Blue Cash
Primary Travel Card: Chase Sapphire Preferred

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Postby Cucumber » Sun Dec 19, 2010 3:27 pm

I think it's HIGHLY UNLIKELY too but did you see the news about debit card fees this weeks? Sucks big time for Visa and Mastercard.
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ronnieloo
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Postby ronnieloo » Tue Jan 04, 2011 9:30 pm

if any of you had a small business you would know how much those fees cut into profits. my buddy owns a pizza shop and with card payments on a 10 buck pizza it may take a 50 cent haircut. then think of how hard it is to make a dollar profit on a pizza and the fees are not fair to the small biz owner.



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