The fees on debit and credit transactions raise costs for all, critics say
The Government Accountability Office has been ordered to study the use of credit by consumers, particularly the effect interchange fees have on consumers and merchants. You may not be aware of these fees, but for lenders, merchants, and consumer advocates, the fees are the next controversial credit-related issue Congress may take up.
An interchange fee is paid by a merchant's bank to a customer's bank or credit union when the business accepts credit or debit cards. Typically, the fees are between 1 and 2 percent of the total purchase.
Multiply that by the millions of electronic purchases and it's not chump change. Moreover, according to consumer advocates and retailers, the fees result in higher prices for everyone, including those paying with cash.
The Credit Card Accountability, Responsibility and Disclosure Act, which President Obama recently signed into law, includes a provision to investigate the fees. The idea is to provide more transparency to consumers.
Demanding that credit card companies give more information about interchange fees would put them on par with food producers, who are required to provide nutritional information on packaging. The details are meant to help people make healthier choices. And yet Americans are fatter than ever.
The same can be said about our appetite for credit. Yes, with more information some have used credit better than others and haven't been trapped by fatty interest rates and fees. Still, this country's collective unhealthy devotion to credit helped push us into this recession, increasing the cost to all of us.
As profit margins narrow, business owners have been mounting campaigns to reduce interchange fees. Several members of Congress have introduced legislation intended to help businesses better negotiate the fees.
The moaning merchants claim they are fighting for their customers. I'm not so sure. Isn't it more likely that if their margins are tightening they'll just pocket the amount saved on lower fees?
Bankers argue the fees are necessary to run the credit system, including reward programs. They say consumers will suffer if they don't have the convenience of plastic. Merchants and bankers are serving their own interests in encouraging or opposing legislation to provide more transparency. When merchants accept credit cards, people spend more than if they pay for their purchases with cash (a fact backed up by academic studies). Lenders fear that if outrage over the fees grows, Congress may roll back the interchange fees or cap them.
Given the credit card industry's history of unfair and predatory practices, the GAO study is a good idea. But I wonder, even if more consumers knew about these fees and were given the option of paying less if they use cash, would they part with their plastic? I don't think so.
Michelle Singletary is a columnist for The Washington Post. She can be reached at singletarym@washpost.com. 
