Lowering credit card processing fees may hurt consumers
Posted by: Curtis Stevens on November 21st, 2009

Many merchants want the government to get involved by forcing Visa/MC to reduce their credit card processing fees or Interchange cost in other words. However, a government watchdog said this could actually end up hurting consumers in the end. Merchants would save some money on their fees, but it is doubted that any consumers would see any drops in their cost of goods. You would also see banks adjust their programs when issuing cards, such as eliminate or reduce all the rewards programs currently available. The important thing to remember is card issuers use Interchange funds to cover the rewards programs they offer and cover cardholders who default. There has been another country that tried to govern Interchange and it turned out to backfire on them. I believe it was Canada or Australia, but do not recall exactly.  I also feel card usage would also decline and because of how consumers live beyond their means, merchants would actually have less sales because consumers would be charging less.  If you look at everything else the government has ever tried to intervene with, the consumer never comes out ahead.  It would have always been better if they simply stayed out.  Politics simply do not mix well.

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