31
Mar
08

Markets Should Determine Credit Card Fees, Not Politicians.

The government wants in your wallet even deeper.The Wall Street Journal appropriately savages two members of Congress for trying to interfere with market forces in the credit card industry. The editorial explains that some retailers don’t like paying fees to credit card companies, but then points out that retailers don’t have to accept credit cards if they think the 2 percent fee is too high.

The politicians should be condemned for their potentially destructive legislation, but the businesses lobbying for price controls on fees deserve greater scorn. Unlike politicians, who instinctively seek to undermine freedom, the retailers should know better than to support government intervention in the private economy.

Read the whole thing.

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2 Responses to “Markets Should Determine Credit Card Fees, Not Politicians.”


  1. April 2, 2008 at 2:19 pm

    I’d suggest looking into the specifics a little closer. I work for a merchant group in Washington, the Merchants Payments Coalition, which focuses on this very issue. Unfortuntely, the WSJ editorial gets the facts, mostly the important ones.

    For example, they state that the market “isn’t broken” but they don’t address the overwhelming market power of Visa and MasterCard, which have no real competition and set the prices for the interchange fee. Anyone who says the fee is determined by the market and not by Visa/MasterCard isn’t familiar with the situation. The Journal is also wrong when it says merchants can offer cash discounts. Because the fee structure is so complicated, only a very few industries can do this. If you only sell one thing, like a gas station or liquor store, it’s possible. Otherwise it’s not.

    I agree with your general instinct that regulation should be avoided. But this is not about price-fixing, this is about a cartel that is dictating prices. Conyers and Cannon have done their homework on this one.

  2. April 2, 2008 at 3:23 pm

    Of course, what I mean is they get the facts wrong — mostly the important ones.


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