How credit card companies want to debit you

[CHIMO]

Would you like to increase the sales tax in order to pay the banks another $12bn a year in profits?

That is the issue that is being debated in Washington, these days. In case you missed it, this is because the issue is usually not discussed in these terms. The immediate issue is the fee that credit card companies are allowed to charge on debit card transactions.

We have two credit companies, Visa and MasterCard, who comprise almost the entire market. This gives them substantial bargaining power. Few retailers could stay in business if they did not accept both cards. Visa and MasterCard have taken advantage of their position to mark up their fees far above their costs. This is true with both their debit and their credit cards, but the issue is much simpler with a debit card.

While a credit card carries some risk because some of the debt incurred will not be paid, a debit card is paid off in full with an electronic fund transfer at the time of the purchase. The credit card company only carries the risk of errors in payment or fraud. While these costs are quite small, the credit companies take advantage of their bargaining power to charge debit cards fees in the range of 1-2% of the sale price. They share this money with the banks that are part of their networks.

http://www.guardian.co.uk/commentisfree/cifamerica/2011/mar/30/banking-creditcards

[freshwest]

1. Interesting. So we're all being taxed BY THE BANKS even if we pay cash! What a winner!

[SlimJimmy]

2. That fee is passed on by the retailers in the form of higher prices. So

while we might not pay a "debit" fee directly to the cardholder, we are still paying it at the cash register.

[freshwest]

3. Guess where we fit in this picture.

:thumbsdown:

[SlimJimmy]

4. Exactly

:banghead: