CALPIRG Blog

In 2008 banks raked in $48 billion in interchange fees.  These are fees they charge merchants for the privilege of being able to accept their cards. 

Ever wonder why so many stores don’t accept American Express or Discover?  It’s because they want to avoid getting charged another interchange fee, which can be up to 2% of a sale.  Unfortunately, Visa and MasterCard are so ubiquitous these days that retailers don’t really have a choice.  They either pay or they don’t take cards. 

Ultimately the fee gets passed on to consumers in the form of higher prices.  Like all overhead costs from rent to electricity, the interchange fees get folded into the markup on everything you buy if the store accepts plastic. 

To make matters worse, you are paying the interchange fee even if you pay with cash or check.  Visa and MasterCard won’t let retailers charge a different price for different payment methods.  Click here to see my banking committee testimony for a lengthier description of why these fees are so bad. 

This issue is one of the many practices by banks and credit card companies that isn’t completely above board.  It is also completely out of the control of the states thanks to federal preemption.  It is because of this, and the dozens of other practices that harm consumers, that congress should create a consumer financial protection agency.  Consumers need someone at the table looking at these products from their perspective.