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Home Publications Blogs Beat the Press The Post Passes Along Credit Card Industry Propaganda

The Post Passes Along Credit Card Industry Propaganda

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Tuesday, 01 June 2010 05:06

The Washington Post reported that several state governments are now trying to remove a clause in the financial reform legislation that could limit the fees that credit card companies charge retailers. The article noted the states' claim that it cost them just 1.5 cents to load benefits like Food Stamp payments onto an electronic card while it can cost 60 cents to issue a check.

The article implies that states could be forced to go back to issuing checks for benefits if they were not able to take advantage of electronic cards that the credit companies now issue for free since they can get back their costs by charging retailers high fees. This is of course absurd. If the credit card fees are limited then states may have to pay a somewhat higher cost to the credit card companies so that they can recoup the cost of issuing the cards, however this would almost certainly be far below the cost of writing checks.

In effect, the credit card companies are using their market power to gouge retailers and sharing some of their gains with state governments to buy their support on this issue. The news article should have pointed this fact out to readers.

Comments (7)Add Comment
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written by izzatzo, June 01, 2010 8:02
If the credit card fees are limited then states may have to pay a somewhat higher cost to the credit card companies so that they can recoup the cost of issuing the cards, however this would almost certainly be far below the cost of writing checks.


If credit card fees are regulated hundreds of competitive credit card companies will lay off thousands of employees because they can't recover enough cost to stay in business. These employees will end up on food stamps paid for by taxpayers, designed by socialists to act as automatic stabilizers in a recession.

All because businesses which accept credit cards from their customers want the government to subsidize them by forcing a reduction in the fees, as they're too lazy to shop around for lower fees.


Stupid liberals.
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written by Silence Dogood, June 01, 2010 10:51
Izzatzo, in his/her wonderfully ignorant and factless style, proposed:

"If credit card fees are regulated hundreds of competitive credit card companies will lay off thousands of employees because they can't recover enough cost to stay in business. These employees will end up on food stamps paid for by taxpayers, designed by socialists to act as automatic stabilizers in a recession. "

This is not supported by the credit card companies enormous profits. It also ignores the fact that each card will have a different fee to the business - you cannot shop for lower fees as the fees are set by the individual credit card.

The business has no idea what the fee will be on a customer's credit card until after it is used, so they have no ability to refuse or tailor their customers' credit card use.

This is a leveler of the playing field, a control on what has become a shadow currency, and a job creator.

Stupid izzatzo


Special counsel -- Colo Center on Law and Policy
written by Ed Kahn, June 01, 2010 11:42
The Post claim is also contradicted by the fact that companies issuing public benefits reap millions of dollars each year from recipeients because they charge each time (after 1 per month free) that recipients draw down benefits on their cards -- such as food stamps.
Cash Discounts
written by floccina, June 01, 2010 12:39
card companies are using their market power to gouge retailers


retailers can give cash discounts if they do not like the CC charges.

Cash Discounts rarely make sense
written by BDawg, June 02, 2010 3:42
If you have a significant number of already-paying-cash customers, a cash discount doesn't help. If you make the discount large enough to convert credit card users, you give a discount to a lot of people without a change in their cash-paying behavior.

The only alternative is a higher advertised price then a cash discount, but that hurts as your sticker prices becomes higher and you'll drive customers away entirely.

The "no extra fees for using credit cards" piece of the contract is quite the scam.

Cash only businesses please!
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written by Queen of Sheba, June 02, 2010 1:08
A correction at the top of the article in the Post states: The article should have noted that the amendment allows merchants to set minimum purchase thresholds for credit cards but not for prepaid or debit cards.

Since the cards issued by the states to food stamp clients and others are issued as pre-paid cards, it would seem that the state treasurers no longer have a dog in this fight. They should butt out. There is more than enough lobbying effort already being expended on this bill.
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written by izzatzo, June 02, 2010 3:50
See Bubba, our lobbying strategy worked for our chain of "All-You-Can-Eat Frog Legs and Fries Redneck Huts".

All we have to do is change the name to "You-Must-Eat-At-Least-This-Much" to satisfy a minimum purchase level for those using credit cards, then for the socialists on food stamp welfare with prepaid or debit cards, they can sit in the "All-You-Can-Eat-And-Stuff-Even More-In-Your-Bags-And-Clothing" Section, as part of our marketing and redistribution plan to survive the recession.

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.

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