Sunday, October 22, 2006
It is no surprise to merchants that the recent Government Accountability Office report found that credit card issuers are imposing excessive penalty fees and failing to fully disclose their fees, policies and practices to consumers ["Credit Cards' Hidden Costs," Business, Oct. 12].
Because the GAO was focused on direct consumer fees, the report missed an even larger hidden fee consumers ultimately pay: the interchange fees charged on virtually every purchase. Hidden from consumers because credit card contracts effectively prohibit their disclosure, these fees were over $30 billion in 2005 alone -- more than double the amount card companies collected in late fees.
Many Americans have never heard of interchange. Even though interchange averages close to 2 percent of every credit or debit card transaction, Visa and MasterCard rules effectively prohibit merchants from telling consumers how much these fees cost them. Interchange acts as a hidden sales tax on U.S. commerce, raising merchant costs and, ultimately, the price of goods and services sold to consumers.
Fees that are intentionally hidden from consumers create a system in which people lack the information they need to make sound decisions about their electronic payment choices. This does not reflect a market in which normal, competitive forces are working. It's time for that to change. If credit card companies insist on gouging consumers, at least let's ask them to be honest about it.
TIM HAMMONDS
President and Chief Executive
Food Marketing Institute
Washington
[Source: Letter to the Editor, The Washington Post]
