Interchange Fee Update

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Whenever you use a credit card, the merchant pays the credit card company an interchange fee. Usually it’s around 1-2% of the purchase amount, but it varies with the card. It’s also invisible, and credit card companies have long prohibited merchants from passing along the charge to consumers, something they can get away with thanks to their monopoly status. Yesterday, however, the Department of Justice reached a settlement with Visa and Mastercard that changes this:

Under the terms of the proposed settlement, merchants could offer consumers an immediate discount or rebate for using a particular type of payment, a particular credit card network (Visa versus American Express), or a low-cost card within that network (a Visa debit card rather than a Visa credit card).

That may give merchants an incentive to steer consumers toward paying with cash or with no-frills credit cards without rewards programs because the swipe fees for those options are lower. The settlement also allows merchants to post the cost of using different types of payments.

The settlement, however, does not allow merchants to levy a surcharge on credit and debit payments beyond the cost of the transaction, as some merchants had sought.

This is progress, though it’s not my preferred solution, which is to make these fees entirely public and allow merchants to pass them along to customers directly if they want to. As I wrote a couple of months ago:

If they don’t, that’s pretty good evidence that card networks are charging a fair price for the service merchants get from them (increased sales, less handling of cash, etc.). And there’s no harm done. But if they do tack on the charge, it’s pretty good evidence the networks aren’t charging a fair, market-clearing price. I say: let’s find out.

Maybe we’ll get there someday. In the meantime, at least this settlement should allow us to gather more data about exactly who ends up paying these fees and whether or not they’re mostly monopoly rents hoovered up by the credit card networks. Stay tuned.

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SIX TRUTHS

Reclaiming power from those who abuse it often starts with telling the truth. And in "This Is How Authoritarians Get Defeated," MoJo's Monika Bauerlein unpacks six truths to remember during the homestretch of an election where democracy, truth, and decency are on the line.

Truth #1: The chaos is the point.

Truth #2: Team Reality is bigger than it seems.

Truth #3: Facebook owns this.

Truth #4: When we go to work, we're in the fight.

Truth #5: It's about minority rule.

Truth #6: The only thing that can save us is…us.

Please take a moment to see how all these truths add up, because what happens in the weeks and months ahead will reverberate for at least a generation and we better be prepared.

And if you think journalism like Mother Jones'—that calls it like it is, that will never acquiesce to power, that looks where others don't—can help guide us through this historic, high-stakes moment, and you're able to right now, please help us reach our $350,000 goal by October 31 with a donation today. It's all hands on deck for democracy.

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