Interchange Fee Report Issued By GAO
The U.S. Government Accountability Office, the investigative arm of Congress, has released its much-anticipated report on interchange fees. Each time a customer uses a payment card to make a purchase, the card issuer takes a cut (the interchange fee), typically in the amount of 1 to 3 percent of the total purchase price. For businesses large and small, the fees have caused headaches. Accepting cards means increased sales. But the cost of those sales often outweighs the benefits. And rejecting popular cards isn’t simple. The GAO addressed those points up at the top of its report, which you can read here. (It’s a 69-page PDF.)
For merchants, the benefits of accepting credit cards include increased sales and reduced labor costs. However, representatives from some of the large merchants with whom we spoke said their increased payment costs outstripped any increased sales. These merchants also reported that their inability to refuse popular cards and network rules (which prevent charging more for credit card than for cash payments or rejecting higher-cost cards) limited their ability to negotiate payment costs. Interchange fees are not federally regulated in the United States, but concerns about card costs have prompted federal investigations and private lawsuits, and authorities in more than 30 countries have taken or are considering taking actions to address such fees and other card network practices.
We will have more on interchange fees and this GAO report in upcoming issues of our monthly Payments newsletter and Exchange magazine. Subscribe to Payments to have the bulletin - which includes features on emerging payments issues and Q&As with payments newamakers – delivered to your inbox each month.
Tags: AFP, GAO, interchange fees, Payments
