At first glance the position of these two companies—which are among the most profitable in the world—appears insurmountable. Yet twin threats loom
Save time by listening to our audio articles as you multitaskAmerica is home to the heftiest interchange fees of any major economy—costs are an order of magnitude greater than in Europe and China. That largely benefits two firms: Visa and Mastercard, which facilitate more than three-quarters of the country’s credit-card transactions. Doing so has made them two of the most profitable companies in the world, with net margins last year of 51% and 46% respectively.
Poor Americans fare the worst. High fees are built into the price of goods, and prices are typically the same whether you pay with card or cash, which the poor are more likely to use. “The way to think about it is if you are not getting your points you are essentially funding everyone else’s,” says Brian Kelly, more commonly known as “the points guy”, who has forged an entire business out of encouraging people to use perks.
Even though adding surcharges is now permitted and legal, it is still difficult. “When we talk to merchants, a lot of them do not even know whether it is a plain card or a reward card, so they do not know what their processing cost is until they get their monthly bill,” says Ms Stavins. It would be a technological nightmare to implement a system that accounted for all the different interchange rates. It would also be off-putting for customers.
Two factors help the bill’s chances. It is sponsored by Mr Durbin, the second-most senior Democrat in the Senate, and it is bipartisan, co-sponsored by Roger Marshall, a Republican from Kansas. The’s best chance is probably as an amendment to another bigger piece of legislation, which is how debit-card regulation passed in 2010.
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