In recent testimony to legislators in California, National Retail Federation senior vice president Mallory Duncan said that card issuers charge retailers interchange fees for purchases made with credit cards. The fees average about 2 percent per transaction and generated an estimated $48 billion in income for card companies.
Furthermore, the bottom line of a purchase is counted for the interchange fees, which means merchants are being forced to pay a fee in order to collect taxes on behalf of the state.
“The credit card companies not only take a piece of every retail transaction, they also take a bite out of sales taxes,” Duncan said while testifying before the state legislature’s Banking and Finance Committee.
Duncan said that interchange fees cost every household about $427 in 2008, which is up from the $159 they cost consumers in 2001.
Along with the basic interchange fees, special rewards cards offered by companies cost retailers more than the 2 percent. A recent report from the New York Times noted that fees charged by card companies are used to help fund the rewards programs, which card companies use to lure banks to their particular payment network.
While retailers deal with their own fees, consumers are also seeing card companies increase penalties for accounts or switching to variable rates. These tactics are being employed in order to deal with new credit card regulations put forward by the Credit Card Accountability, Responsibility and Disclosure Act. Starting in February, lenders will be held back in their ability to raise rates.
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