Many Democrats seem to dislike credit card companies, despite the myriad benefits they offer consumers. This perspective seems to focus on vague and misguided claims about greed and price gouging, and treats almost any inconvenience associated with credit card use as prima facie evidence of fraud. The answer, of course, is more regulation. Or so they say.
More than a decade ago, Sen. Dick Durbin (D-Ill.) managed to
Durbin amendment of the same name The Dodd-Frank Act subjects debit card transaction fees to price regulation. But undeterred by the fact that the policy has reduced the consumer value of debit cards for a decade, Durbin last year credit card competition lawsimilar regulations will be extended to credit cards.
Some politicians seem reflexively embarrassed by the idea that major industries remain unregulated.
For whatever reason, perhaps because it allows them to target two large industries at once, CCCA proponents often point to airline-issued credit cards by name.For Durbin
summoned The CEOs of Visa, Mastercard and two airlines are scheduled to appear before the Senate Judiciary Committee next month.
Consumers generally benefit greatly from credit card rewards programs. In fact, 30 million Americans, nearly a quarter of American households,
Airline issued credit card. These cards generated more than three-fifths of his frequent flyer points in 2022, and over the long term he generated 15 million domestic trips.Consumers are having fun even outside of the airline industry tens of billions of dollars Earn points rewards every year.
CCCA is mainly
End these rewards programs and require card issuers to raise other costs for consumers. Economics is simple. When governments regulate some of a company’s profits, companies typically try to recoup their losses by raising prices or eliminating customer benefits.
The Durbin bill seeks to weaken the state.
false allegations Visa and Mastercard’s “duopoly” in credit card payment networks. Major banks must offer two networks to process credit card transactions, and one of them must not be Visa or Mastercard. This would likely “increase credit card competition and choice to reduce excessive credit card fees” (according to one report) Invoice overview). Supporters argue that consumers would then enjoy lower prices.
These dubious propositions contradict both history and Econ 101.
First, the 2-3% credit card transaction fees that CCCA sponsors lament are not evidence of market dysfunction. The market rarely gives someone everything they want because the laws of economics require people to make trade-offs. Additionally, the bill’s mandate for dual payment networks would weaken users’ rights.
cyber securitywhich relies on strong security standards from Visa and Mastercard.
“Some merchants who enjoy the benefits of accepting credit cards for payment, attracting customers who like this convenience, are willing to cut costs,” said Veronique de Ruzy of Mercatus Center. They have made the decision that they do not want to pay.”
write. “So, as special interests often do, they looked to Washington to intervene on their behalf.”
The market’s incompatibility with Mr. Durbin’s personal preferences does not mean there is no competition, but rather that there is choice between consumers and competitors.
Next, consider the observed effects of the Durbin Amendment to understand the harm that CCCA could cause to consumers. The damage extended far beyond the lost reward points.
Durbin amendment
I managed to lower it Increased banks’ average interchange fees from $0.50 to $0.24, reducing revenue from such fees by between $6.6 billion and $8 billion annually. However, consumers did not benefit. Instead, it enriched major retailers and transferred an estimated “$1 billion to $3 billion a year from low-income households” to them. analysis Graduated from George Mason University.
richmond federal reserve
discovered After the revision, we found that only 1.2% of retailers reduced prices, 21.6% increased prices, and more than three-quarters did nothing.
Additionally, to recoup lost post-Durbin profits, banks have significantly increased account (and other) fees and reduced their offering of fee-free accounts. By 2013, only 38% of banks offered free checking accounts, down from 76% in 2009. Many banks have also increased the minimum account balance required to avoid fees.
“A typical low-income bank customer who previously qualified for a free checking account, but who no longer meets the monthly minimum balance requirement after Durbin, will likely be paying about $12 a month in fees, plus an additional $1 or more. “You’re likely paying an ATM fee of 100%,” the George Mason authors wrote. “The annual cost is about $160.”
Some politicians seem reflexively embarrassed by the idea that major industries remain unregulated. This forces them to go in search of concocted monsters to destroy, tip windmills, and fight armies of sheep. As with the Durbin Amendment and the CCCA, such mismanagement forces Americans to pay unintended, if not unexpected, regulatory costs.
