Research and Statistics

Ad campaign fights credit card interchange fees


American households pay hundreds of dollars a year in hidden credit card fees called interchange fees each year, a practice that a business coalition announced it would fight to eliminate.

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Average American households pay hundreds of dollars a year in “hidden” credit card fees called interchange fees — a practice that the Merchants Payments Coalition (MPC) has announced it would fight to eliminate.

The MPC — an industry group representing 2.7 million convenience stores, retailers and small business owners — launched an extensive ad campaign March 30, kicking off the first step of a plan that placed ads in eight specific Congress members’ districts. The campaign is targeting House Financial Services Committee member constituents, and encourages viewers to contact their representatives about doing away with interchange fees.

The merchants’ ad campaign was timed to begin just prior to this week’s Congressional hearings on key consumer-related credit card bills. On March 31, the Senate Banking Committee passed the Credit Card Accountability, Responsibility and Disclosure Act of 2009 (or Credit CARD Act) prohibiting abusive credit card practices.  That legislation will now go to the full Senate for discussion and vote, but a date has not yet been set. On the House side, the Credit Cardholders’ Bill of Rights was debated April 1 and will be up for a vote in the Subcommittee on Financial Institutions and Consumer Credit on April 2. If it passes through the subcommittee, it goes to the House Financial Services Committee for discussion and vote.

Neither bill addresses merchant interchange fees, but the merchants group targeted districts of members of the House Financial Services Committee with the new ads, since they would be the ones who would likely vote on such a bill if introduced.

Interchange is the term applied to fees that a merchant pays to a credit card company for each transaction a consumer makes. A card issuer will detract an interchange fee — about 2 percent of the purchase value — from the amount it pays the bank that handles the transaction. According to the MPC website, about $2 of every $100 a consumer spends on purchases is routed to credit card companies, increasing prices for goods even when not bought with plastic. In 2007, Americans paid $42 billion in interchange fees — twice that of credit card late fees in the same year.

“With this unprecedented effort, Congress will hear the message of consumers and small business owners across the country loud and clear,” said Hank Armour, CEO of the National Association of Convenience Stores in a press call. “Stop the billions of dollars in hidden fees. Start our economic recovery by protecting Main Street businesses and American consumers, not big banks and credit card companies,” said Armour.

The American Bankers Association has opposed legislation, saying interchange fees are necessary to maintain the costly credit card payment transactions system operated by card processors such as Discover, American Express, MasterCard and Visa.

“ABA believes that interchange rates and governance should be set by the free operation of the market forces in the private sector,” the association says in a policy paper. ABA opposes proposals to have state or federal governments set price controls or otherwise regulate interchange rates, which currently are set by the private market through contractual relationships.

See related: How credit card transactions work

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