So far in 2022, Missourians have faced 40 years of high inflation, record-breaking energy prices and staggering supply chain shortages. The last thing Congress should do now is make their lives harder by imposing strict regulations on their credit cards. Unfortunately, a new bill backed by progressive Senator Dick Durbin (D-IL) would do just that.
In recent months, retail lobby groups have said almost anything to claim that credit card companies are out to punish them. They have vociferously urged members of Congress, including Missouri Senators Roy Blunt and Josh Hawley, to take up their cause. They claim that the small fee they pay for transactions – known as interchange – is crippling their business. Nothing is further from the truth. In reality, credit cards offer tremendous value to both businesses and consumers.
Interchange fees are used by community banks and credit card companies to cover card issuance costs, offer generous rewards programs, and provide robust fraud protection. If a customer’s debit or credit card is used fraudulently, it’s usually the cardholder’s bank — not the store or gas station where the fraudulent purchase was made — that refunds the amount. The banks, not the dealers, are affected. Last year, the exchange system saved businesses and consumers more than $80 billion in fraud.
Beyond the tremendous value of fraud protection, interbank fees allow consumers to enjoy valuable credit card rewards programs. These programs aren’t just a luxury for wealthy credit card holders. Many cards offer major cashback programs that automatically deposit reward money into the cardholder’s bank account. Thousands of Missourians are benefiting from these programs, and this extra money is vital as food and gas prices continue to rise. This new bill would be a hidden tax for Missouri consumers.
In addition, merchant credit card acceptance is huge. It is not for nothing that 99 percent of companies now accept cashless payments. Electronic payments are efficient and result in higher transaction amounts because consumers are not constrained by all the cash in their pockets. Some studies show that accepting credit card payments can result in a 60 percent increase in business at some merchants.
Interchange fees do not fuel inflation. These small fees range from about one to three percent on transactions. They are not the exorbitant sums that traders and their allies claim.
Credit card companies also take the economic climate into account. For example, both Visa and Mastercard have capped the total amount of interbank fee that can be charged on gasoline. With fuel prices at historically high levels, many consumers will reach these limits before they have fully filled their tanks. The gallons of gas they buy after they hit the cap are non-returnable. This begs the question: do petrol station owners benefit from high prices?
Many gas stations – especially in rural areas – charge a higher price for drivers who pay by credit card. Gas station owners claim that this is the consideration of interbank fees. But if credit card companies don’t collect the fee at a certain price point, what do gas station owners do with the extra profit they’re raking in? They certainly don’t give it back to the drivers who pay the exorbitantly high prices.
Senators Hawley and Blunt know the people of Missouri are suffering from inflation, and it’s not because of the credit cards in their wallets. Credit cards offer tremendous value, fraud protection and convenience. This is all thanks to interchange fees. The last thing Congress should do is allow Washington to over-regulate a system that works for Missouri consumers, businesses and communities.
Phil Christofanelli is a Republican State Representative from Saint Peters, MO. He is a lawyer and chairs the House Committee on Rules – Legislative Oversight.