Why not reduce interchange?An article in the Jan. 13, 2009, issue in USA Today titled "During financial pinch, banks reduce credit card rewards" (www.usatoday.com/money/perfi/credit/2009-01-12-banks-credit-card-rewards_n.htm?loc=interstitialskip) notes that the card brands and issuers, in an effort to reduce costs, are eliminating or cutting back on the benefits of their rewards cards. (Hopefully, business owners read this article.)
The card companies tell us that they fund rewards programs exclusively by interchange fees paid by merchants. (Let's forego the marketing spin of more cards in the wallet plus how reward cards increase spending at the merchant.)
The card brands tell us fraud is down and the cost of processing is down - all components, they say, of interchange. The cost of cardholder reward programs is a pass-through to the merchant in interchange fees, and those expenses are going down due to elimination or reduction of the benefits.
So, what is their rationalization now for current interchange rates? Is my view of this incorrect?
Merchants are up in arms over interchange, and rightly so.
Will the card brands reduce interchange fees to help reduce merchant processing expenses during this tough economic time, or will they pocket the added income to increase profits (and pay fines)?
While MasterCard Worldwide and Visa Inc. are now private corporations, it is my opinion that the greed mentality of the banking industry coupled with that of the issuing side are still pervasive within them.
Which side of the mouths from which they speak are the facts - the truth? My advice to the card companies is to get their stories straight before inserting the foot of one area in the mouth of another area.
Biff Matthews
CardWare International
Biff,
Thank you for sharing your perspective on an issue that is not just on the minds of our readers but is also of great concern to merchants, who have taken their complaints to legislators on state and local levels.
If you broach the topic of lowering interchange on GS Online's MLS Forum, you might stimulate lively discussion and, hopefully, constructive action.
Editor
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