http://www.bloomberg.com/apps/news?pid=20601087&sid=aOD5I8T6SQLM&refer=home Credit-Card Fees Targeted by Retailers Who Say Banks Overcharge By Jonathan D. Salant Nov. 29 (Bloomberg) -- The subprime mortgage crisis is giving department and convenience stores and gas stations a new argument in asking Congress for power to negotiate the fees banks charge them to process credit-card transactions. Retailers such as Target Corp. say banks make so much money from the fees that they give credit cards to people who canât pay their debts, just as they provided mortgages to homeowners who canât afford them. âItâs another version of subprime lending,â said Mallory Duncan, chairman of the Merchants Payment Coalition representing trade groups for 2.7 million gas stations, drug stores, supermarkets and other retailers. âThe system should be fixed before we are in a position of having to bail out more banks.â Duncan, a registered lobbyist, is senior vice president and general counsel of the National Retail Federation, whose board members include Delray Beach, Florida-based Office Depot Inc., Cincinnati-based Macyâs Inc., and Plano, Texas-based J.C. Penney Co. The merchants want an antitrust exemption so they can band together to negotiate with banks over the so-called interchange fee, usually between 1 and 2 percent of the purchase price, that a retailerâs bank pays the cardholderâs bank each time a customer swipes a credit card. The retailerâs bank then collects the fee from the merchant. Consumers donât see the charge, which merchants say is built into their prices. âSignificant Issueâ âThis is a significant issue for us, and a very high cost for us,â said Eric Hausman, a spokesman for Minneapolis-based Target, the second-largest U.S. discount retailer. âWe do expect the next Congressâ to look into the issue, he said. Retailers say the fees should be part of the discussion when Congress returns in January and looks at overhauling bank rules. So far, the merchants have pushed their proposal without success. The House Judiciary Committee approved it in July, though it hasnât reached the full House or Senate. Banking groups and the credit-card companies say the interchange fees ensure that retailers get paid even if cardholders default. If the fees were onerous, merchants wouldnât be so eager to take credit cards, they say. âYou have a choice of whether or not you want to accept plastic,â said Jason Kratovil, vice president for congressional affairs for the Independent Community Bankers of America, the Washington-based trade group for smaller banks. âIf the pros outweigh the cons, you do it. It makes a real pithy sound bite to make it that these big banks are out there to gouge consumers.â Representatives at Bentonville, Arkansas-based Wal-Mart Stores Inc. and Kohlâs Corp. in Menomonee Falls, Wisconsin, had no immediate comment. Spokesmen for Macyâs, J.C. Penneyâs, Office Depot, Hoffman Estates, and Framingham-Massachusetts-based TJX Cos. didnât return phone calls yesterday. Credit-Card Issuers Among the largest credit-card issuers is New York-based Citigroup Inc., which this week received a U.S. government rescue package, including $20 million in cash. Two more credit-card issuers, Bank of America Corp., based in Charlotte, North Carolina, and New York-based JPMorgan Chase & Co., were among nine financial institutions receiving $125 billion from the Treasury in October. âI am connecting the dots with the credit-card industry and the mortgage industry,â said Lyle Beckwith, a senior vice president with the Alexandria, Virginia-based National Association of Convenience Stores. The banks say credit-card fees cover operating costs, protect banks against default and fraud, and allow them to offer cards with no annual fees and rewards. The charges vary from bank to bank and depend in part on whether the card includes cash rewards or other benefits. Without the ability to recoup costs, smaller banks wouldnât be able to issue cards and compete with the larger institutions, said Paul Weston, president of TCM Bank NA in Tampa, Florida. Fewer Accounts âYouâd see a reduction in the number of accounts,â Weston said. âYouâd dial back the features on the account. Some banks would reintroduce fees.â Financial institutions and their trade associations formed the Electronic Payments Coalition to oppose the legislation, arguing that merchants are simply trying to reduce costs. âLike any business, they want to find ways to lower their cost of doing business,â said Trish Wexler, a spokeswoman for the coalition, whose members include New York-based American Express Co., Citigroup and San Francisco-based Visa Inc. âWe believe that going to Congress and asking for consumers and for the financial institutions to pay is the wrong way.â Beckwith, whose organizationâs members include Dallas-based 7-Eleven Inc. and San Ramon, California-based Chevron Corp., said banks got away from the business model of determining how much a house was worth and how much a homeowner could afford. âThe credit-card business is run by the same banks the exact same way,â Beckwith said. âTheyâre not in the business of making loans based on the ability to repay, theyâre sending out cards based on a business model of making money off the interchange fee.â
FWIW, there's a gas station near where I live that has a cash price some 11 cents cheaper than credit card price, per gallon.
I experienced the same w/a gas station a couple of weeks ago. So, this morning, I checked with the lady that owns the local veggie stand. She pays $0.75 per transaction, and ten percent. She has a $7 minimum, and says, she's very careful, asking for cash, giving away eggs for a $20.00 cash purchase, because she's writing checks to these guys for $1200 a month. Amazing. Latins carry a lot of cash. They don't trust banks, which probably is a very good idea. I'm sure that helps a lot. But still, I thought it was something like a flat 7%. I'm sure the big guys get a lot of breaks. But man. Oh, she said you have to buy, or lease the machine, too. Great racket.
I would love to see Visa, Mastercard and American Express go down. They charge 3% to the merchant, for just processing the interchange, and then extract ogilopoly profits from cardholders carrying a balance through high interest rates, miscellaneous fees and all sorts of other charges. They are vermon that do nothing of real worth, and they have essentially been protected as a cartel by U.S. Courts and Congress. (The same can be said of Ticketmaster - another stealth monopoly).
https://www.clearlypayments.com/blog/interchange-fees-by-country/ US has the highest interchange fees, so thus all the rewards on credit card, merchants pay for them.