Lawmakers Say Credit Card Fees Put Merchants vs. Customers
Credit card reward programs put the needs of mom-and-pop merchants against the wants of affluent cardholders, according to Vermont Representative Peter Welch. Welch made the remarks to Bloomberg BusinessWeek reporter Peter Eichenbaum in support of Congressional proposals to limit credit card interchange fees. Credit card processors withhold between one and four percent of transaction amounts, some of which goes to fund perks and rebates.

An amendment to the financial industry overhaul legislation currently under consideration by lawmakers would allow merchants to set minimum and maximum purchase limits. While many smaller retailers, restaurants, and convenience stores often post signs that state a minimum purchase of $5 or $10, those store policies violate merchant agreements that require vendors to accept credit cards regardless of the purchase amount.

Not all credit cards offer cash back rebates or other reward options, and many merchants mark up products and services to compensate for interchange fees. Smaller retailers rarely qualify for the deeply discounted processing fees enjoyed by big box stores. As a result, a customer who buys a candy bar with a credit card can cause a merchant to lose money on the transaction. Members of the bipartisan committee working out changes between the House and Senate versions of the bill expect some type of change to interchange rules later this year.

About the Author


Joe Taylor Jr. is an internal business consultant for a Fortune 500 company, who writes about finance, culture, and design. He holds a Bachelor of Science in Communications from Ithaca College.