Credit Cards Online Information

Rapidly increasing fees charged by credit and debit card companies coupled with a lack of federal controls over those fees are squeezing food retailers' profit margins, according to the Food Marketing Institute (FMI). In recent testimony to the House Subcommittee on Financial Institutions and Consumer Credit, FMI Senior Vice President John Motley claimed that there have been 11 credit/debit fee increases in the past 12 months "with still more expected this year." He said card associations (VISA/MasterCard) collected $29.2 billion in 2003 from electronic transaction fees.

According to a 2003 report by the TowerGroup, food retailers handle over half of all electronic credit and debit card payment transactions. "At the same time," Motley said, "the cost of accepting these cards has been skyrocketing, often exceeding the 1 percent net profit margin of the typical grocery store." He urged Congress to consider international efforts to control escalating electronic payment fees: "Several countries, including the UK, Australia and Israel, and the EU have initiated caps on fees, changes in operating rules, antitrust/fair trade investigations, regulation of the allowed components of fees, studies and legislation."

Motley said the marketplace offers no incentives for financial institutions to reduce their electronic transaction fees. "The current interchange fee model is inverted from normal competitive market models--more volume means more cost," he said. Last July, FMI called upon the Federal Reserve to investigate fast-rising and proliferating fees for electronic transactions, to explore ways to cap these costs and to disclose them to consumers. According to Motley, the results of the Fed's study are expected to be released next year.

# posted by Medical Information : 2:35 AM