Credit Swipe Fees: A Tax on Cash Customers

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Thursday, 10 March 2011 06:24

Michelle Singletary, the Post's generally adept personal finance reporter, missed one today. Regulations by the Fed limiting debit card swipe fees are definitely a positive step. Currently these fees are passed on to all consumers. The ones getting nailed worst are the cash customers who pay the higher price without even getting the convenience. This is like a sales tax.

The reduction in fees will not be passed on everywhere and always to consumers (firms do have market power), but to be an economist here, if firms thought they could mark up their prices by more, why aren't they doing it already? In other words, it is reasonable to assume that most of the savings will be passed on to consumers.