A few years ago, a shoulder injury sent me to a physical therapist who declined my credit card. He prefers money or checks to the “swipe” fees he will pay if I use plastic for my insurance co-pay.
Such fees have long been a thorn in the side of merchants and service providers, who are charged a percentage of the entire transaction and a flat fee – simultaneously known as the formal interchange rate – to process each sale. on credit or debit card. The bulk of the fee will go to the companies and financial institutions that issue the cards; the hosting networks (consider Visa and Mastercard) get a cut from the issuers.
Last week, entrepreneurs had to unload part of the fees before a Congressional committee that looked into whether they were excessive and restricted competition. The hearing came just weeks after Visa and Mastercard, which set the fees, launched the changes delayed by the coronavirus pandemic.
Si Sen. Dick Durbin (D-Ill.), Chairman of the Committee on the Judiciary, said the changes, to be passed on to price traders, will come as consumers are already facing high inflation. A bipartisan group in Congress had earlier asked Visa and Mastercard to postpone the changes, he said.
“It’s a sweetheart deal for the dominant network, for the largest banks, and for some cardholders with ritzy rewards programs,” Durbin said of the current system. “But usually the small business and the consumer – they pay the price.”
Laura Karet, CEO of Giant Eagle, a supermarket and convenience store chain serving the Ohio Valley, estimates the cost of the changes for her company: $ 1.3 million annually. (Forbes puts 2021 revenue for the private company at $ 10 billion.)
In his testimony, Karet noted that of the many consumers who shop for groceries online – a product of the pandemic – and have to pay with a credit or debit card, “the cost of swiping grocery fees store taller than ever. “
Representatives from Visa and Mastercard were also invited to the hearing, who challenged the assumption that they were collaborating in setting the fees. Instead, said Linda Kirkpatrick, president/North America for Mastercard, companies are fiercely competing with each other, with other networks (American Express and Discover, for example), and with new players and technologies (such as PayPal/Venmo, Klarna and Zelle).
He described the rate changes implemented by Mastercard as “neutral”, as some fees went up and others went down.
Durbin, whose Durbin Amendment in 2010 limits the interchange rate on debit cards – which some may be worried about for credit cards, too – cited statistics that put the number of debit and credit transactions at 127 billion by 2020. .In comparison, cash and check transactions that year totaled only 38 billion.
“We’ve become a country, obviously, maybe a world, that pays with plastic,” he said.
That might explain why that physical therapist I used to pay by check now accepts plastic, according to his website.
Marlene Kennedy is a freelance columnist. The opinions expressed in his column are his own and need not belong to the newspaper. Let him in [email protected].
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