Retailers such as Target Corp. say banks make so much money from the fees that they give credit cards to people who can’t pay their debts, just as they provided mortgages to homeowners who can’t afford them.
“It’s another version of subprime lending,” said Mallory Duncan, chairman of the Merchants Payment Coalition representing trade groups for 2.7 million gas stations, drug stores, supermarkets and other retailers. “The system should be fixed before we are in a position of having to bail out more banks.”
The merchants want an antitrust exemption so they can band together to negotiate with banks over the so-called interchange fee, usually between 1 and 2 percent of the purchase price, that a retailer’s bank pays the cardholder’s bank each time a customer swipes a credit card. The retailer’s bank then collects the fee from the merchant. Consumers don’t see the charge, which merchants say is built into their prices.
How much you want to bet we wouldn’t see a blanket 1% drop in prices at these stores if they were allowed to band together to force banks to cut back on their credit card fees. The stores want that extra 1% for themselves, or they would take the quite legal route of offering discounts for cash customers. Big merchants like Target have to pay a fee for every check they cash. They have to pay a fee for every card they swipe. Why is this suddenly bad? Oh, right, they’re claiming banks are giving cards away unscrupulously to people who can’t pay their debts … WHICH DOESN’T AFFECT TARGET BECAUSE THEY’VE ALREADY GOT THE MONEY. It’s not like the credit card company doesn’t pay the store if you don’t pay your bill. Target’s already made their money from the ‘unscrupulous credit card’ bubble. In fact, I can’t remember a time I’ve been in a large store like Target anytime in the past 5-10 years where I wasn’t offered a credit card and a discount for signing up for that credit card on the spur of the moment. Even overstock stores like TJ MAX *still* try to get me to sign up for their store card.