Reducing Credit Card ‘Read Fees’ Would Benefit Retailers, Not Consumers


Peter G. Williston

  • Peter G. Williston is CEO, President and Director of Citizens Bank of Lafayette and Chairman of the Government Relations Committee of the Tennessee Bankers Association.

Tennessee retail special interest groups have shown us that they will say anything to convince Tennessee residents that they are suffering at the hands of credit card companies (“Make credit card companies follow the same rules as other businesses”), when the reality is that retailers’ disdain to pay for the essential service of accepting credit cards is misdirected. Interchange fees, also known as “swipe fees”, are the small acceptance fees, paid by retailers, that enable card networks to provide consumers with a convenient and secure way to shop. .

It’s time to set the record straight on the costs and benefits of trading. Tennessee banks rely on interchange fees to offset their costs of issuing and reissuing cards, maintaining and servicing cards, and resolving disputes with cardholders. And if a customer’s credit or debit card is used fraudulently, it’s usually the customer’s bank, not the merchant, that reimburses them. Banks, not retailers, bear the costs of fraud.

Credit card interchange fees also allow financial institutions to innovate and provide greater security and reliability to their consumers. Given the massive volume of transactions during the COVID-19 pandemic, customers need to know that their payment information is secure and card issuers are charging interchange fees to invest in consumer security.

One of the most common lies peddled by groups of retailers is that sweeping fees are the second highest cost after labor for most businesses. This statement is totally false. Interchange fees represent a minimal portion—between 1% and 3%—of overall costs for small businesses. It pales in comparison to other common costs, such as cost of goods sold, rent, utilities, and insurance payments. Additionally, this ignores the exponential value that accepting credit cards offers retailers through increased sales, time savings, payment security and fraud reduction.

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Pete Williston

Retailers who claim that interchange fees are a significant cost to small businesses while ignoring the benefits they offer are misleading at best – and outright lying at worst.

Ten years of data exist to prove that a reduction in interchange fees does not translate into lower prices for consumers, as mega-retailers claim. When the retailer-backed Durbin Amendment capped debit interchange fees in 2011, the price cut did not materialize. In fact, the opposite happened. When the Federal Reserve Bank of Richmond examined retailers’ response to the Durbin Amendment, it found that only 1.2% of retailers had lowered their prices, while 22% had raised them. The vast majority of retailers pocketed the savings, rather than passing them on to consumers.

The state further reducing interchange fees will have the same effect – Tennessee residents will not see reduced prices. On the contrary, retailers will pocket the savings.

By targeting interchange fees, retail groups are ignoring the immense value that electronic payments bring to them and their customers. We need our legislators and regulators to simply look at historical data to see that any government intervention in private business decisions between payment networks and retailers will only cause consumers and small businesses to lose the security, benefits and savings.

Lawmakers should not step in and bar Tennessee banks from receiving compensation for a service our industry provides to retailers.

Peter G. Williston is CEO, President and Director of Citizens Bank of Lafayette and Chairman of the Government Relations Committee of the Tennessee Bankers Association.


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