Should retailers set their own rates?

October 16, 2009

794358_atm_3Once again this debate has surfaced, but now the President and a new Merchants Payment Coalition are taking this issue very seriously. The retailers and business owners want the privilege of negotiating interchange fees with the banks.

In view of the recent new credit card Legislation, this issue will probably not go away. The Merchants Payment Coalition was formed to represent 2.7 million businesses and over 50 million employees in having a voice in the assessment of interchange rates. They claim to be helping to protect the interest of the consumer. The interchange rates are the rates that retailers and other business owners pay to accept credit cards at their establishment.

In addition to the Merchants Payment Coalition, President Obama and Representative Peter Welch of Vermont are conducting studies into the rates. This issue has been a long-standing one with the retailers, who believe their rates are too high. The current economic crisis has hurt many businesses and the retailers feel lowering or at least being able to negotiate rates with the banks could help their sales.

analysts have argued that if the banks are ordered to lower their fees, the consumers could face rate higher rates and fees on their credit cards. Australia has gone through this process and consumers did not save any money as a result.

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