Credit card interchange fee datapoint of the day

By Felix Salmon
July 16, 2009

Andrew Martin reports:

At Target, for example, interchange fees represent the second-largest store-level expense, behind payroll. The costs are similarly eye-popping at Home Depot, where officials say they top the price of health care insurance for employees. “The amount of money we’re spending on interchange would put 10 associates in each of our stores,” Dwaine Kimmet, vice president of financial services for Home Depot, said at a recent conference on credit card fees.

Martin is right that lower interchange fees might not mean lower prices for consumers. But they would improve value in other ways.

Alternatively, we can just let the market take care of things, as Floyd Norris proposes:

Make it clear that credit-card companies cannot force merchants to pass the fees on to their customers — This coffee is $1.50 if you pay cash, or $1.79 if you use plastic. If Visa will offer a better deal to the merchant than AmEx does, maybe a Visa purchase should be $1.69. A little price competition would be welcome.

There’s a good reason that sales taxes are lower in the US, where they’re visibly added on to posted prices, than they are in Europe, where they’re invisibly included in posted prices. Maybe the first thing we should do in the war against interchange fees is simply make them visible.

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