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Next Up? Credit Card Reform

Lyle Beckwith says the time is ripe to shift efforts from debit cards to credit cards.
November 10, 2017

​WASHINGTON – Debit card fee reform has been good for consumers and merchants, something that Congress recently reaffirmed. However, the job shouldn’t be left half done—Congress should address the fees of credit cards as well, writes Lyle Beckwith, NACS senior vice president of government relations, in a Morning Consult opinion piece.

“Every time these swipe fees come up, the banks spew a smokescreen of disinformation, fearful of losing the tens of billions of dollars they’re gouging from small merchants and consumers. But despite all their propaganda, there’s one fact they simply can’t deny or hide: that the fees the banks charge merchants when a customer swipes a credit card are rigged,” he wrote. MasterCard and Visa set the fees, which “These ‘swipe fees’ cost merchants as much as 4% off the top of a $100 load of groceries, or $4 – even though it costs the bank only a few pennies to process the transaction. Profit margins for the banks can run as high as 10,000%.”

Beckwith outlined how lack of competition keeps the credit card swipe fees high—and hurts everyone, whether paying with plastic or not. “The average family pays more than $400 a year extra on groceries, gas, clothes and every other consumer product just because of swipe fees—an especially big bite for poor people.”

He also lamented how these fees hurt small merchants—swipe fees are now their second-largest operating expense. “Because consumer spending is such a huge part of our economy, these onerous fees also mean a slower economy, fewer jobs and less prosperity,” he wrote. “The banks and the card companies have created a distorted industry that looks more like the trusts that dominated major industries such as railroads and oil a century ago than the free-market system we enjoy now.”

It’s time to end the swipe fee monopoly for credit cards. “Educated consumers and policymakers should join us to start demanding that the banks and card companies stop rigging this part of the market. We need the entire card market to be fair, open and competitive,” Beckwith concluded.