Consumer Payment Card News

Cost Shifting

A big battle is brewing between merchants and the payment card industry that may lead to higher costs and the loss of perks and rewards for consumers. Merchants say they are fed up with the rising fees they must pay to take credit cards and have headed to the courts for help. At the same time, merchants admit their businesses would suffer or collapse if they did not take credit cards. The payment card industry says the higher merchant fees reflect the increasing costs of operating a highly efficient and convenient payment system, one that balances the interests of the financial institution, the merchant and the consumer. If merchant fees are cut, it may limit the ability of the financial institution to provide rewards or incentives to cardholders and may result in annual fees or higher interest rates.

The Association for Financial Professionals released a study this week which found that virtually all businesses that accept credit or debit cards from consumers indicate that they do so to satisfy customer demand. However, merchants say the blended rate for accepting credit cards has risen by 4%, almost one-quarter report increases of 10% or more, including 18% that report a 10-24% increase and 6% that report an increase of more than 25%. More than 82% of survey respondents agree to some extent with the lawsuits filed against the associations alleging price fixing and anti-competitive behavior. Two-thirds favor to some degree caps on merchant fees. More than half of merchants have attempted to negotiate lower fees, while 30% restrict consumer choice to certain cards and 29% requested unbundled pricing. A third of organizations that sell to consumers have programs to encourage customers to use the payment method preferred by the seller.

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