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Globe Editorial

Take a swipe at card fees

June 9, 2010

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CONGRESS CAN throw a lifeline to consumers and retailers struggling through the recession by giving them relief from the fees that businesses must pay to issuers of debit and credit cards. The financial-regulation bill passed by the Senate would help in two ways.

First, it would regulate the fees that Visa and MasterCard demand from businesses for debit card transactions. The uncapped fees, which sometimes reach 3 percent of the amount purchased, totaled nearly $20 billion last year. While retailers bemoan fees for both debit and credit cards, the debit fees are particularly unjustified since there is no danger from deadbeat cardholders, as there is with credit cards.

Under the Senate bill — but not the version passed by the House — the Federal Reserve would set “reasonable and proportional’’ fees for the actual costs of such transactions. House-Senate conference committee members should approve the new regulatory authority, even though it unwisely exempts small card-issuing banks of less than $10 billion in assets.

Second, the Senate bill would help make the cost of credit card transactions more transparent. Credit card companies would no longer be allowed to prohibit merchants from offering discounts for cash sales or limiting either credit or debit card use to sales above a minimum amount. Both help businesses reduce their costs on card transactions. Many merchants already take these steps despite the companies’ prohibition; the Senate would make sure they face no penalty for doing so. Letting merchants charge card users more would also create competitive pressure to keep fees down.

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