The card industry and the merchants' disagreement over credit card interchange fees has escalated into a full-grown public relations war as card companies and large retailers vie for public support. Analysts familiar with the disagreement say that both sides have now resorted to TV ads, newspaper ads, and even internet campaigns to convince the public to side with them.
The source of the bitter arguments, experts say is the presence of interchange fees that card issuers impose on retailers and merchants whenever customers use plastic to pay. A certain percentage of the total purchase is charged to the retailers in return for using the electronic payment systems of the card firms. Merchants argue that with more and more Americans using credit cards to pay, they can stand to lose a substantial portion of their profit margins. When this happens, they point out, they have no choice but to pass on these charges to their customers.
Representatives from card companies say that this particular policy would further add to the problems that cash-strapped American consumers are already encountering. Both sides accuse each other of being insensitive and oblivious to the plight of consumers struggling to pay off debts and keep their jobs. Experts say that retailers have even resorted to petition drives and signature campaigns to gain the support of the public.
Major card companies argue that merchants are refusing to shoulder the costs of using electronic payment systems. Credit card experts point out that the prevailing sentiment among industry players is that retailers are unwilling to absorb the fees associated with using their electronic payment systems. Merchants, for their part, say that interchange fees come only second to labor when it comes to expenses. Unlike labor, they argue, the fees are often non-negotiable.
Analysts say that Congress has stepped in with three separate bills that can help resolve the conflict. The first bill, sponsored by House Judiciary Committee Chairman John Conyers, Jr., would give retailers the freedom to negotiate interchange fees through collective bargaining agreements. The second bill, introduced by Sen. Richard Durbin of Illinois is similar to the one authored by Conyers. However, the last bill, prepared by Rep. Peter Welch of Vermont, would give merchants the freedom to set minimum and maximum credit card payments.
Representatives from the card issuers explain that retailers do in fact, have the right to negotiate the interchange fees. They point out, however, that most merchants choose non-negotiable fees instead.