It seems like yesterday that AOR's and rewards credit cards were the major topics at FWF.
Are rewards credit cards going the way of AORs? Some hope so.

Link.

In The News

Retailers and Bankers Debate Credit Card Fees

By: Harry Sheff
October 08, 2009

WASHINGTON—The debate over credit card interchange fees—the percentage of credit card transactions that card companies collect from retailers—has been heating up as financial services firms and retailers square off in Washington.

The discussion centers on H.R. 2382, also known as the Credit Card Interchange Fees Act, which supporters—mostly retailers, grocery stores and convenience stores—say would rein in rising fees. The bipartisan bill is sponsored by Rep. Peter Welch, D-Vt., and Rep. Bill Shuster, R-Pa.

“There is an arms race to create cards with higher fees and more bells and whistles,” said the National Retail Federation’s general counsel Mallory Duncan. “The market checks that would normally exist to curb this escalation in fees are diminished because the card companies know that every merchant is required to take these expensive new cards or lose their ability to accept any cards. The Welch-Shuster bill would allow the most expensive cards to be refused, and while we expect that few merchants would actually refuse cards if this were passed, it would make the card companies think before they reflexively introduce cards with higher fees.”

The American Bankers Association disagrees, arguing that the bill would dismantle a fair and efficient 50-year old electronic payments system. “The value delivered through this payment system to consumers, merchants and financial services organizations far exceeds the costs,” the ABA said in a statement. It continued, “Merchants get enormous benefits—particularly the ability to maximize sales, guaranteed payments and the ability to avoid losses from bad checks, employee theft, and costs associated with billing and collections and managing and depositing cash.” The ABA called the “penny or two on each dollar” a “very small price to pay for all of these benefits.”

But the Merchants Payments Coalition, a trade group made up of various merchants supportive of the bill say that interchange fees in the U.S. are much higher than they are in other countries and warn that they may increase without new guidelines. Further, the MPC claims, only about 13 percent of interchange fees actually go toward covering the costs that they were originally implemented to cover.

“Most consumers don’t know it, but every time they swipe a rewards card with its miles and concierge services, they are driving up the price of everything they buy even higher,” the NRF’s Duncan said. “This particularly hurts less-privileged Americans who don’t have rewards cards or can’t get cards at all because Visa and MasterCard rules effectively require that everyone pay the credit card price even if they are paying with cash, check, debit card or even food stamps.”

Retailers, the NRF says, have been unable to offer consumers a lower cash price for merchandise because of road blocks set up by the credit card companies. “The result is that the average household paid an estimated $427 in higher prices last year, up from $159 in 2001,” the NRF says, blaming rewards-type cards.

The ABA’s argument is that the bill would actually increase annual fees for consumers and effectively end rewards popular programs.

The Credit Card Interchange Fees Act is currently before the House Financial Services committee, chaired by Rep. Barney Frank, D-Ma.

The AOR threads are pretty much gone. If we get rid of the rewards CC threads then this forum will be filled with worthless drivel by trolls of the likes of BrianBrianBrian!

bank lobby > merchant lobby therefore interchange stays.

Oh, brother. Another instance of "The banks are making a profit off its customers so we're going to put an end to it by playing the "choice" card."

Not to merge topics, but DaveHanson - where do we stop? Overdraft fees, interchange rates, what next? As I said, a dangerous precedent.......

catbertsf said:yeah sure. those big retail chains r known to pass savings to us average consumers instead of fattening their bottom lines.

Typical misunderstanding of how capitalism works. In a free market economy, Companies try to maximize profits, but then other companies come in freely and compete and gradually the economic profit approaches zero.

Can you give one example of where a big retail chain increased profits and maintained that larger profit margin without competition?

BTW this isnt a txt msg lol plz use full words n captlzashun

This particularly hurts less-privileged Americans who don’t have rewards cards or can’t get cards at all because Visa and MasterCard rules effectively require that everyone pay the credit card price even if they are paying with cash, check, debit card or even food stamps.”
It is interesting to me that places like Sams and Costco limit the credit cards they accept (likely to reduce fees). Furthermore, several liquor stors I patronize have a cash price (approximately 5% less). What is stopping WalMart/Kroger/Best Buy/etc from giving this 5% discount and forcing the credit card companies to renegotiate their fees?

biomedeng said:This particularly hurts less-privileged Americans who don’t have rewards cards or can’t get cards at all because Visa and MasterCard rules effectively require that everyone pay the credit card price even if they are paying with cash, check, debit card or even food stamps.”
It is interesting to me that places like Sams and Costco limit the credit cards they accept (likely to reduce fees). Furthermore, several liquor stors I patronize have a cash price (approximately 5% less). What is stopping WalMart/Kroger/Best Buy/etc from giving this 5% discount and forcing the credit card companies to renegotiate their fees?

One would have to taken into consideration the added cost of handling cash...

Cash also sometimes gets miscount or misplaced. With CC's, everything is electronic. An easier and efficient way of managing flow of funds.

Personally, I think it's rather ridiculous on what CC's charge for interchange fees. I'm looking at starting my business and it's something I'll have to build into my GP. I can see why other smaller shops limit credit cards or give a cash discount price.

The Sams/Costco "warehouse club" thing cuts both ways - they restrict to only lower-interchange-fee cards, but the cards they do accept (Discover is a good example) often give much lower rewards to customers if the item was bought at a warehouse club.

One wouold hope high interchange costs would allow another CC company to step in and win over retailers quickly.