The Merchants Payments Coalition in the US has welcomed a planned congressional hearing in May on ‘secret fees’ it estimates at almost $40bn a year that credit card companies allegedly charge to consumers each time

a credit or debit card is used.
The Merchants Payments Coalition was formed last year by trade associations representing retailers, restaurants, supermarkets, drug stores, convenience stores, gas stations, on-line merchants and other businesses and the International Association of Airport Duty Free Stores (IAADFS) is a Coalition Member.
‘Merchants have known for years that banks' interchange fees are a hidden tax that is driving up the cost of merchandise and services for American consumers every day,’ Merchants Payments Coalition Chairman Mallory Duncan, Senior Vice President and General Counsel at the National Retail Federation, said.
‘The Federal Reserve needs to question whether the growing use of cards rather than cash and cheques, especially high-interchange debit cards, undermines the Fed's ability to measure and manage the nation's money supply.
‘We welcome the fact that the Federal Reserve is concerned enough to hold a conference focusing on this issue, and hope that this is a sign of action to follow. American consumers and the American economy deserve protection.’
‘The fees that the credit card companies charge defy logic and they are using them to increase profits far more than to provide any meaningful benefits to retailers,’ Coalition Secretary Teri Richman, Senior Vice President for public affairs and research at the National Association of Convenience Stores, said.
‘Credit card company rules effectively prohibit retailers from providing discounts for cash or cheques in all but a handful of situations. As a result, consumers pay more even when they don't use their cards. It's time for this constant picking of consumers' pockets to come to an end.’
At the centre of the controversy is Interchange, a fee that is collectively set by Visa and MasterCard's member banks. This is a fee that is a percentage of each transaction, sometimes accompanied by a flat fee, that banks collect from retailers every time a credit or debit card is used to pay for a purchase, adding up to billions of dollars each year. Visa and MasterCard together make up 90% of the US credit and debit card business.
Complex fee structures make it difficult to precisely calculate an average interchange rate, but a recent Morgan Stanley report found that a weighted average for Visa and MasterCard interchange had increased from 1.58% in 1998 to 1.75% in 2004 (an increase of 10.8%) and is forecast to grow to 1.86% in 2010 (an additional increase of 6.3% over 2004 and 17.7% since 1998).
With the growing use of plastic, the dollar volume of interchange collected has grown from $9.4bn in 1998 to $17.4bn (an 85% increase) and is projected to reach $32.4bn in 2010 (an 86% increase over 2004 and 244% since 1998).
Banks claim that they charge interchange to make up for bad debt or fraud. But with fraud costs consistently decreasing in recent years, the bank?s critics argue that the costs interchange is intended to cover aren't nearly as much as the amount charged, and banks already make huge profits from cardholder interest and fees.
Moreover, the coalition believes that much of the fraud that interchange is intended to cover is the fault of banks' poorly designed card programmes, not the fault of merchants.