Hanoch

Does True Competition Among Credit Card Issuers Exist?

I do not see how the author concludes that it is "clear" that the credit card companies don't compete. Given the number of issuers, and the incessant battle for market share, I don't see how that is possible.

Moreover, the statement that "we want the whole credit-card market to shrink" strikes me as odd. Who is this "we"? This is a market economy in which decisions are made by individuals, not some collective "we". If I feel a credit card suits my purposes, then I use it; if not, then I don't. I don't need some policy wonk making decisions for me.

Credit Card Interchange Fee Datapoint of the Day

It is not at all that clear to me that there is some sort of anti-competitive problem here. There are a number of credit card options available on the market (e.g., Visa, Mastercard, Amex, Discover). Further, the merchant is free to accept or reject the issuer's terms. An example of this is merchants who do not accept Amex cards due to the higher interchange fees. Thus, if a merchant did not want to accept the issuer's terms that prices for cash and plastic purchaser be the same, the merchant need not accept credit cards. Obviously, almost all merchants feel the terms are acceptable.

I would be more inclined to agree with your suggestion if there were actual collusion among the card issuers on this term. However, I tend to doubt that is the case.


On Jul 20 12:11 PM jimmy46 wrote:

> The basic problem is that Visa & Mastercard

Credit Card Interchange Fee Datapoint of the Day

nym:

I don't think it is a problem; rather its more a matter of personal preference. I use a credit card rather than a debit card mainly because if something goes wrong with the transaction (e.g., a product is defective, a merchant accidently double-charges, the merchant doesn't accept a return, etc.), it becomes Amex's headache, not mine. I just report the problem, and they take care of it without any money coming out of my pocket. There are also other perks that I like such as an automatic doubling of the product warranty, etc. (maybe you can get stuff like that on debit cards, I don't know). Is it true that there are no interchange fees charged to the merchant with debit card?

Credit Card Interchange Fee Datapoint of the Day

There is a big advantage to consumers in using plastic over cash in terms of convenience. Personally, I don't like carrying large sums of cash around to pay for things, nor do I like constant trips to the bank or ATM to get more of it. Time is valuable. Moreover, I like a credit card statement each month as a convenient way to let me know how much and where I am spending. Thus, the credit card companies provide a valuable service for many consumers and, obviously, no service is free.

The merchants complain about the interchange fees, but I have to think dealing with increased cash payments would involve additional costs to the merchants over electronic credit card networks, from the time it takes to process them at the register, from losses due to human error and employee theft, from the time it takes to manage and account for the cash, from increased security needs, and so forth. In addition, it would seem that merchants likely generate higher sales volumes when they accept credit cards. A customer without cash in his pocket is much more likely to buy something on the spot when a merchant accepts credit cards rather than go through the hassle of finding an ATM or going to a bank and then returning to the store. So, while it is easy to the measure costs of interchange fees in a vacuum, it seems, to get a more accurate read on this issue, you need to know how much the merchants are benefiting from accepting credit card payments.