A couple of weeks ago most media outlets were breathlessly reporting that as of January 27, merchants could start charging their customers extra to use a credit card when making a purchase. And for many people, these reports may have made them think twice about what they pulled out of their wallets the next time they approached a check-out stand.
Once the dust settled, though, it quickly became apparent that few merchants (if any) were going to assess these fees. The reasons for that weren’t exactly altruistic; the settlement left in place rules preventing companies from assessing the fees if they have stores in states that don’t allow them (there are 10 such states) or accept other cards to which the fees don’t apply (American Express, Discover, etc.). So, crisis averted, at least for now.
However, that doesn’t mean this is a non-issue that doesn’t merit discussion. These fees were made possible due to the settlement of a lawsuit brought by a number of U.S. retailers against Visa and Mastercard, claiming that they had illegally conspired to fix prices and charge unfair rates to merchants accepting the cards for payment. It was another in a long line of such suits.
And the courts aren’t the only place this battle is being waged. Retail industry trade groups and retailing giants like Walmart continue to lobby Congress to pass laws limiting the amount card issuers like Arizona Federal can charge merchants who accept our cards. And while no such law regarding credit cards has yet been passed, their lobbying has paid off big-time: the Durbin Amendment to the Dodd-Frank Act of 2010 placed a cap on “swipe fees” paid by merchants on debit card transactions and imposed other restrictions on card issuers and payment systems.
Why was Congress willing to get so involved in a transaction between two businesses (the merchant and the issuer)? Well, aside from the cynical view (millions of dollars in campaign contributions from retail-industry lobbyists) and the “political opportunist” angle (making political “hay” by punishing the “big, bad banks”), there’s the consumer protection angle: the idea (ardently pushed by retail groups and repeated by countless Senators and members of Congress) that reducing merchants’ costs would result in lower prices for consumers.
Did the savings happen? Well, a study conducted by the Electronic Payments Coalition (admittedly a group with a stake in this, but their process seems straightforward) found that prices paid by consumers had actually gone up 1.5 percent since the debit card “swipe fee” limitations went into effect on October 1, 2011. But let’s bring it closer to home: have you seen prices go down at the places where you shop in the last 16 months? I haven’t.
No, my guess is that the estimated $8 billion in annual savings being realized by retailers as a result of the Durbin Amendment is just being absorbed into their bottom lines. And that’s exactly where any revenue from credit card surcharges would end up as well. Think about it: they’re not talking about giving discounts for paying with cash, even though the law allows that. They don’t want cash, with the accounting, handling and security issues that come with it. They want the convenience of accepting cards, issued and maintained by financial institutions (who also bear almost all of the associated risk). They just don’t want to pay for it.
Why should you, as a member of Arizona Federal – one of Us –care about all this, especially if it doesn’t look like the fees are going to happen on a broad scale? It’s simple, really: as a member of this cooperative, you’re an owner, so you share in the cost of operating the credit union and stand to reap a portion of what we earn. If such fees, or even the threat of them, discourage people from using their Arizona Federal-issued cards, it means less income to cover day-to-day expenses. And that means fewer benefits for all of Us.
So, what to do? First, if you don’t currently have an Arizona Federal Visa debit or credit card, apply for one. There’s no more convenient or secure way to pay for your daily purchases, and I know you don’t want to miss out on the great perks like merchant discounts and Scorecard Rewards points that are available to Us when we use these cards. Then, if (or when) you do have one of our cards, please make it your card of choice for your daily payment needs. If it’s a debit card, choose “Credit” when swiping to maximize both your protection and the benefit to the cooperative. If it’s a credit card, be careful not to let your spending exceed your ability to pay it off; we don’t encourage paying interest on balances from to day-to-day spending. And stay tuned, because when the retailers start making further inroads in their attacks, we’ll need your voice as we fight to protect all of Us.
As always, your comments are welcome and appreciated. And, as always … thanks for being one of Us.