Washblog

About a month ago I posted here on some of the work I've been doing with www.unfaircreditcardfees.com to raise awareness of credit card interchange fees, and in light of VISA's recent announcement, I thought I'd give everyone a quick update.  For those of you who caught my earlier diaries, you know that interchange is a percentage of the sale price that VISA and Mastercard collect on every purchase using a credit or signature debit card.  Just this week, VISA announced that it would be raising its interchange rate by an average of 0.6%.  That may not sound like much until you fully crunch the numbers:

"The average increase in interchange rates doesn't tell the full story because it doesn't reflect credit card companies' efforts to move consumers to premium cards, the growing use of plastic, or the automatic raises Visa and MasterCard receive through inflation and increases in consumer spending," Mallory Duncan, senior vice president and general counsel of the National Retail Federation and chairman of MPC, said. "Interchange fees are already taking too much money out of consumers' pockets. Visa and MasterCard should be lowering interchange rates, not raising them."

Those seemingly modest increases have let to annual increases that average over 16%.  Last year, VISA and Mastercard collected nearly $36 billion, which was an increase of nearly $7 billion from 2005.  Since 2001, the figure has increased 117.5%, much more than VISA and Mastercard would have you believe:

Visa and MasterCard would like consumers to believe that interchange is only going up a tiny fraction of a percentage when it's really going up in double-digit numbers and far faster than the rate of inflation or consumer spending," Duncan said. "These fees are ultimately paid by consumers, but working families can't afford these kinds of increases.

The average American family already spends $300 a year on interchange, whether they own a credit card of not, and I certainly believe that working class families could find a better use for that money than supporting the credit card rewards of the wealthy.  For more information on interchange and how it affects all of us, visit us at http://www.unfaircreditcardfees.com.