Don’t change interchange President Jonathan E. Johnson III overlooks several important facts regarding credit card interchange fees (“Retailers, consumers squeezed,” Opinion, Wednesday).

of the $48 billion in interchange fees paid to credit card companies
ends back in consumers’ pockets in the form of credit card rewards.
Frequent-flier miles, redeemable bonus points and cash-back programs
are all financed largely by interchange fees. Consumers can earn
rewards totaling 1 percent or more of the amount of purchases made on a
credit card.

If interchange fees are as abusive as Mr.
Johnson claims they are, why does continue to accept
them? The answer is simple: Consumers like the convenience and security
of credit cards, and retailers make more than enough from credit cards
through increased sales to pay for interchange fees. Retailers unhappy
with interchange fees always have the option not to accept credit
cards. (Costco Wholesale Corp., for instance, does not accept
MasterCard or Visa credit cards.)

Government price controls
on interchange fees will shrink rewards programs and force increases in
annual cardholder fees – as happened in Australia in 2001, when the
Reserve Bank of Australia capped interchange fees. Congress should heed
Australia’s experience before interfering with the payments marketplace.


Information policy analyst

Competitive Enterprise Institute