WASHINGTON (Gray DC) – 70 percent of Americans hold at least one credit card. It’s a financial tool which makes many transactions easy, but also comes with a cost. Every time you swipe or tap your card – there’s a fee. Two senators are now trying to diversity who collects it.
Senator Roger Marshall along with Dick Durbin are introducing a bill that aims to create more competition in the credit card sphere.
“I think that competition is the backbone of capitalism,” said Marshall.
In every other industry, it is effective. Why would it function in this one specifically?
Larger banks would be required under the Credit Card Competition Act to offer at least two card networks for each credit card transaction. The goal is to increase the market’s selection of companies who charge swipe fees.
“I believe that this bill will definitely benefit consumers. Every time you increase market competition, the customers win, according to Marshall.
According to Bankrate’s Ted Rossman, a financial expert, this might be a problem with no cure.
Large retailers would profit, according to Rossman. “I believe that card firms would undoubtedly lose. Unfortunately, I believe that consumers would also lose.
Major retailers urged Congress in a letter to pass the bill. Retailers claim that the law will save businesses 11 billion dollars, according to the letter.
There is no assurance that any of those savings will be passed on to the customer, as Rossman points out.
Rossman predicted that the merchants would just keep the difference. “They won’t reduce the price. They promise to do so. However, the federal reserve discovered that only 1% of businesses reduced prices after the Durbin Amendment.
Rossman adds that banks will find a way to make up their losses somewhere else.
These costs may resemble a game of whac-a-mole.
Banks will raise things elsewhere if something is taken away in one place. Thus, that could cost us more in other fees. Particularly for those who might not spend as much, may have poorer credit scores, or may have lesser incomes, they might be less inclined to issue credit cards. There might be some unforeseen repercussions, in my opinion,” said Rossman. l
Security might be one of those unforeseen outcomes as well. There is opportunity for error because the market has been opened to new vendors.
In a letter to congress, 51 bankers associations claimed that the proposed legislation would, quote, “give control of our nations credit card systems to breach-prone retailers.”
Who will profit from the “Credit Card Competition Act,” according to experts.
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