Retailers Protest of Interchange Fee
Cloaks Real Issue for Consumers:
Higher Costs at the Check Out for Cardholders

You may have read or heard about the most recent exchange between big retail companies and banks that issue credit cards – something called an interchange fee has merchants filing lawsuits against banks and credit card companies. At first glance, this might all sound like a war between the giants – but in fact, you, the consumer, will feel the direct impact. ACEC promotes competition in the marketplace and the latest move by some of the largest merchants in the country to eliminate or reduce this interchange fee they incur, will lead to less competition in the credit card world and fewer options for consumers.

But first, let’s look at look at what happens now when you use your credit card and determine where consumer protections truly exist. When most credit cardholders are standing at the counter handing their credit card to the salesperson at the point of sale, they are not necessarily cognizant of all the machinations taking place to facilitate their transaction. Hundreds of thousands of other electronic transactions are taking place in stores everywhere and there is a vast network in place that provides for that volume, implements security measures to protect consumers from identity theft, and covers the cost of providing funds until the actual payment is processed. Merchants who accept the most widely used credit cards will draw your business to their stores; but instead of compensating for that benefit in the form of a fee, they want to pass the charge onto the consumer – it’s called a surcharge or more appropriate, a "check out fee." Some of the largest credit card companies currently prevent merchants from passing that fee onto you, the consumer. That practice is called the "No Surcharge Rule."

The merchant side of this issue contends the interchange fee costs consumers – but the fact is that merchants raise the prices of their goods because they are forbidden from charging it to you as a transaction fee – so they get you at the check out instead.

The Reserve Bank of Australia set its standard on interchange fees in 2003, and forced several large credit card companies to reduce the interchange rate. DATAMONITOR performed an independent analysis of the credit card market in Australia in March 2005 as a result of the interchange decision and among many conclusions, found this: "Taken collectively the direct impacts of the interchange reforms on consumers have been wholly negative. They are paying more in annual fees for credit cards and loyalty schemes, some retailers are now surcharging for credit card usage and they are not seeing lower prices at the checkout." Another survey released by the Australian research firm East & Partners Pty. Ltd. on August 1, 2005 has further proven DATAMONITOR’s conclusions. East & Partners survey found that nearly half of all merchants plan to add surcharges in the next six to 12 months.

Merchants are keeping their eyes on the prize – the surcharge. Consumers must keep their eyes on their rights, their benefits and their purchasing power and options.

Stay tuned – this issue is not going away and Congress and regulators will be involved before you know it.