I hope you like paying for things you didn't know you were paying for, because you're about to get to do a lot more of that soon. Last month I noted that new MasterCard interchange fee rates were going to put the hurt on merchants and consumers alike. Well, this time it's Visa, and if they have anything to say about it (and they do) you'll be paying more at the register without even knowing about it.
But it's not all bad news. Thanks to the efforts by Carl Levin and Chris Dodd, targeting the "tricks and traps" and hidden fees by the big card companies (i.e. the banks -- J.P. Morgan Chase, Wachovia, Citi, etc) are starting to pay off, because state lawmakers are starting to introduce legislation to attack the issue.
Read on:
Increases in credit card interchange rates announced by Visa last week average only 0.6 percent, but the $36B in total interchange fees consumers paid in 2006 will probably increase close to 20 percent this year, the Merchants Payments Coalition said recently.
"The average increase in interchange rates doesn't tell the full story because it doesn't reflect credit card companies' efforts to move consumers to premium cards, the growing use of plastic, or the automatic raises Visa and MasterCard receive through inflation and increases in consumer spending," Mallory Duncan, senior vice president and general counsel of the National Retail Federation and chairman of MPC, said. "Interchange fees are already taking too much money out of consumers' pockets. Visa and MasterCard should be lowering interchange rates, not raising them."
Duncan's group is who I'm working with via UnfairCreditCardFees.com, just for the record. The group consists of groups itself -- restarateurs, convenience store owners, gas stations, and the like. They're all in different businesses, but they all have one thing in common: Visa and MasterCard rule their lives. Some brave retailers, mostly in convenience and bars, have opted not to accept credit cards at all because the high fees make it unprofitable to charge small amounts. Basically, the interchange fee is like an ATM fee for merchants, except we end up paying them through higher prices. They like to say, it's the biggest credit card fee you've never heard of -- but if you're interested, there's more about it on the site here.
Is there any good news? Actually, yes. There's no link to the CardLine report, but here's how it begins:
Amid the Democratic Congress' increased scrutiny of credit card practices, a slew of legislators in 13 states thus far this year have introduced 23 pieces of legislation and one resolution aimed at reforming interchange fees and other card practices. But to date, none of the bills has passed. The bills range from eliminating interchange fees from the sales-tax portion of any retail transaction in such states as Florida, Kansas and New York to requiring credit card companies and banks to disclose their operating rules and interchange fees in such states as Nebraska and Texas. Bills in Tennessee and Washington would cap interchange fees. Because there has been little movement on any of the bills, Rhonda Bentz, a Visa USA spokesperson, tells CardLine that "you don't score points by getting close."
I'm not sure what that means, except they don't realize what's coming for them. There's a tide turning against the card companies. They've operated with impunity for years now, and I can see why they're comfortable. But they shouldn't be. Democrats in Congress are starting to get roused, and so they are in the states. Bill Gates is talking about challenging them through online micropayments, and Steve Case is working on the GratisCard.
They're not the whole solution, but it's a start -- and the more pressure the better. Something big is gonna happen, I can feel it.