U.S. consumers may not save money and could wind up paying higher credit-card costs if lawmakers force payment networks, including Visa Inc. and MasterCard Inc., to cut fees charged to merchants, a government watchdog said.
"Merchants would benefit from lower interchange fees," the Government Accountability Office said in a report. "Consumers would also benefit if merchants reduced prices for goods and services, but identifying such savings would be difficult. Consumers also might face higher card-use costs if issuers raised other fees or interest rates to compensate."
Lawmakers may cite the report as they debate whether to cut "swipe fees" paid by merchants. Wal-Mart Stores Inc. and Target Corp. are among retailers asking Congress to reduce the fees. Bankers have said the current system helps merchants by guaranteeing payment and simplifying record-keeping.
Banks use interchange revenue to pay for rewards programs and cover costs from cardholders who default. It's also a source of revenue; interchange fees totaled $48 billion last year, according to the National Retail Federation, and accounted for 19 percent of revenue for card-issuing banks on the Visa and MasterCard networks, according to trade magazine Cards and Payments.
"From our perspective, it shows that consumers could be harmed," Trish Wexler, a spokeswoman for the Electronic Payments Coalition, a Washington-based industry group that opposes interchange regulation, said of the report.
Fees charged to merchants at the point of sale average about 2 percent in the United States -- the highest in the world, according to Rep. Peter Welch, D-Vt. He's sponsoring a bill that would prohibit payment networks, including San Francisco-based Visa and Purchase, N.Y.-based MasterCard, from setting higher interchange for premium cards.
Welch says richer rewards hurt "mom-and-pop" merchants in his district.
Visa and MasterCard told the GAO that interchange rates have remained flat in recent years when fees charged for debit purchases are included. The government watchdog said it found that swipe fees, particularly premium cards, have increased and that rate schedules have become more complex.
