Now a fair business will reduce prices so it doesn't factor in the processing fees,
In November, the National Retail Federation and more than a dozen retailers asked a judge to reject the proposed settlement. In a brief submitted to a U.S. District Court judge in Brooklyn, N.Y., the trade organization wrote that the new fees threaten a merchant's ability to keep prices low for customers.
Wal-Mart, Macy's, JCPenney, Limited Brands, Gap Inc, and The Neiman Marcus Group were among those who joined the NRF in claiming that "raising consumer prices by adding an 'interchange tax' is no remedy for Visa's and MasterCard's continuing monopoly abuse."
I guess I just feel that a real anti-trust ruling would say that credit card companies can't gouge merchants, not that merchants are free to pass the gouging on down.
The actual levels of fees vary by transaction. Merchant fees significantly vary by scheme and card type. The fees for credit card transactions are the highest, followed by the fees for signature-debit card transactions. The fees for PIN-debit card transactions are the lowest. Among merchant fees for credit cards, American Express has the highest and Discover has the lowest (Chart 1).
While rewards and merchant fees are related, it is not clear how closely. Over the past several years in the United States, we have observed increasingly more generous rewards as well as rising interchange and merchant fees. But this does not necessarily imply that rewards have caused merchant fees to rise. Merchant fees depend not only on rewards but also on the costs of handling a card transaction by the card issuer or the acquirer, as well as their profit margins. Rewards can be financed by different sources, including reducing the card issuer’s profit margin. Therefore, higher merchant fees do not necessarily imply more generous rewards, and vice versa.
Still, in some cases a close positive relationship between rewards and interchange fees (and merchant fees) is evident. In 2005, MasterCard and Visa introduced new credit card categories that charge higher interchange fees to merchants and provide more generous rewards to card users. Both MasterCard and Visa now offer four credit card categories. MasterCard’s Core Value and Visa’s Traditional cards provide the least generous rewards (or no rewards), while MasterCard’s World Elite and Visa’s Signature Preferred cards provide the most generous rewards. Chart 3 shows the 2007 interchange fee rates for MasterCard and Visa at retail stores. Tier I includes the rates for retail stores that generate the highest number or value of transactions, while Base includes the rates for retail stores that generate the least. Regardless of their transaction volume, merchants consistently pay higher interchange fees for cards with more generous rewards.
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