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GAO Report Seems to Back Up Convenience Stores

This article was written by in Consumer. 1 comment.


We told you back in July about the Credit Card Fair Fee Act of 2009. To summarize: Visa and Mastercard skims a percentage of the retail price every time you use a card to buy something. It’s called an “interchange fee”. Allegedly, U.S. merchants pay up to six times more for this service than merchants in other countries, and are unable to negotiate fees.

Generally, this sort of scenario is called a monopoly, but so far the arguments I’ve seen for and against have avoided that word, probably because Visa and Mastercard are different companies. Duopoly, maybe?

Anyway, lawmakers asked the Government Accountability Office to review the options on the table, namely:

  • setting or limiting interchange fees
  • requiring their disclosure to consumers
  • prohibiting card networks from imposing rules on merchants that limit their ability to steer customers away from higher-cost cards; and

  • granting antitrust waivers to allow merchants and issuers to voluntarily negotiate rates

The GAO concluded:

If these measures were adopted here, merchants would benefit from lower interchange fees. Consumers would also benefit if merchants reduced prices for goods and services, but identifying such savings would be difficult.

Difficult, but not impossible. The merchant groups argue that if the interchange fees could be reduced, the prices of everything in the store could be reduced. But at the same time, they also argue that high interchange fees are squeezing them out of any available profit margins and forcing them out of business. And if the profits are non-existent, they won’t be reducing prices.

Interchange fees resulted in $48 billion dollars in revenue last year, through what I suspect are mostly automated processes.

Credit Cards: Rising Interchange Fees Have Increased Costs for Merchants, but Options for Reducing Fees Pose Challenges, U.S. Government Accountability Office, 19 November 2009

Published or updated November 23, 2009. If you enjoyed this article, subscribe to the RSS feed or receive daily emails. Follow @ConsumerismComm on Twitter and visit our Facebook page for more updates.

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About the author

Smithee formerly lived primarily on credit cards and the good will of his friends. He is a newbie to personal finance but quickly learning from his past mistakes. You can follow him on Twitter, where his user name is @SmitheeConsumer. View all articles by .

{ 1 comment… read it below or add one }

avatar John DeFlumeri Jr

The stores really do pay a lot in merchant fees, and they look to avoid AMEX a lot of the time.

John DeFlumeri Jr

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