Retailers are asking Congress to consider regulations and restrictions on interchange fees paid by retailers when they accept credit and debit cards for purchases. The retailers are claiming that the interchange fees are “too expensive” and drive the costs up on products and services purchased by consumers.
I beg to differ on this issue. First off, retailers are receiving their money quickly and efficiently for items purchased when a credit or debit card is used for a purchase. Compare this to accepting a check for payment, which may or may not be paid when it is presented to the institution. Insufficient checks or counterfeit checks are a considerable risk when accepting checks for payment. Returned check charges and fraudulent checks would hurt their bottom line as well. Check deposits would have to be made with a financial institution that would result in several days before the merchant received their money on the checks accepted.
Financial institutions do earn interchange fee income when credit or debit card are used. This income though is necessary to cover our costs associated with providing this convenience. Interchange fees cover the costs of data processing, card fraud, and defaults on credit cards. Consumers like using their credit and debit cards and it is service that institutions want to continue offering in the future.
Frankly, if interchange income was eliminated or drastically reduced on credit and debit card transactions, all institutions would have to re-evaluate their card programs. New fees and account restrictions would have to be created to cover the expenses associated with running the program without the interchange income.
The big retailers seem to want something (convenience and protection against fraud) without having to pay for it. The current interchange fee structure has been working for years and, as the saying goes, “If it ain’t broke, don’t fix it”.