False Claim: “Credit card swipe fees are skyrocketing.”

Truth: Interchange rates have stayed virtually constant over the last decade, even with the significant advancements in technology, convenience, and new security and fraud protection measures – all advances that add significant value for merchants and consumers. The fact is that consumers are choosing to use their cards more today than in the past. And studies have shown that retailers increase their sales by up to 50 percent when they accept debit and credit. Merchants make more sales, receive higher profits, are guaranteed payment and reduce their risk when they accept debit and credit. In fact, in some significant sectors, interchange rates have been going down. For example, supermarkets have always paid extremely low card acceptance rates – and that rate has decreased to around 80 basis points.

False Claim: “Interchange fees are ‘secret.’”

Truth: All fees are available through a simple Google search for each of the respective payment networks. Merchants also know exactly what their own fee structure is, as given to them through their bank or card processor that provides their card acceptance services. There is no basis for this claim.

False Claim: “Swipe fees are higher in US than in any other country.”

Truth: The total amount merchants pay for the benefit of accepting credit or debit cards (the “merchant discount fee”) is in fact roughly the same in the U.S. and Europe, according to a report by the Aite Group. The interchange portion that is applicable to a transaction, which varies from country to country, does tend to be higher here than in Europe. But the remaining portion of the merchant discount fee is significantly lower, rendering the overall cost to merchants virtually the same.

False Claim: “Consumers would benefit if Congress forced down interchange fees.”

Truth: If interchange fees were pushed down, merchants would pocket the difference and not pass these savings along to consumers. Moreover, consumers would end up paying more – in the form of surcharges at the register, or higher fees from their card issuers to make up for the loss of interchange revenue. Representatives of the U.S. government, international economic experts, Australian regulators, and merchants themselves have acknowledged that consumers would see no savings from any interchange regulation.

• Study by CRA International on effects of Australian regulation of interchange: “there is no evidence that losses to consumers have been offset by reductions in retail prices.”

• GAO Study on interchange fees, 2007 (GAO-08-558, p.2) “Since Australia’s regulators acted in 2003, total merchant discount fees paid by merchants have declined, but no conclusive evidence exists that lower interchange fees led merchants to reduce retail prices for goods; further, some costs for card users, such as annual and other fees, have increased.”

• Testimony by Tom Robinson, owner of “Rotten Robbie’s Convenience Stores, in front of the House Judiciary Committee – May 2008:

Mr. Keller: Okay. That is the $64,000 question, because your whole argument is you want lower interchange fees because it is better for consumers. And so that is why I want to give you the chance. He is saying it is not going to benefit consumers. Is it going to benefit consumers or not?

Mr. Robinson: There is not a businessman that does not attempt to keep the margin.

• Australia’s Standing Committee on Economics, Finance, and Public Administration, June 2006: “The committee was concerned by evidence which suggested that some merchants are profiteering from the ability to surcharge.”

• The Australian media coverage of the Reserve Bank of Australia’s decision to lower interchange rates has been very clear as to the impact on consumers.

False Claim: “Merchants can’t offer a cash discount. The financial reform interchange amendment will finally allow us to offer consumers this discount.”

Truth: There is nothing prohibiting merchants from offering a cash discount. In fact, federal law allows merchants to offer cash discounts, and the card networks all make very clear in their rules that cash discounts are allowed. So the question becomes this: why aren’t they offering cash discounts now? Answer – because doing so would make them lose money. Merchants are profiting off of individuals who choose to pay with cash. So why are they spending millions of dollars on lobbying Congress to pass this bill? What they really want from legislation is the ability to surcharge their customers at the register, pick and choose which cards they will and won’t accept from their customers, and the removal of penalties if they falsely advertise the cash discounted price.

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