More credit card reforms are on the way. This time, the reforms are aimed to protect merchants from high interchange fees, but it also means big changes for consumers. The interchange fee is the fee a merchant pays for allowing you to use your credit card.
Currently, credit card issuers charge an interchange fee that's about 2% percentage of each credit card transaction and 1% of debit card transactions. Part of the fee goes to the credit card issuer (e.g. Citibank or Bank of America), another part to the credit card network (e.g. Visa or MasterCard) and the final part goes to the bank the retailer uses to process credit card transactions. Discover and American Express act as both the credit card issuer and the credit card network for their credit cards, so they get a larger cut of the interchange fee.
Banks make a large portion of their money in interchange fees. In fact, Forbes quotes that banks made about $50 billion in interchange fees in 2008. Unfortunately, many businesses, especially small businesses, can't afford to pay the fees.
Have you ever seen a sign in a gas station or other small store that specifies a minimum purchase amount to use your credit card or offering a discount to customers to use cash? They say something like "$5 Minimum Purchase Required for Credit." This is technically against merchant-credit card agreements, but still some stores continue to use the signs, perhaps out of ignorance or maybe out of desperation.
If passed, the new credit card bill, called the Durbin Amendment, will allow merchants to require a minimum purchase for credit card transactions. Stores will also be able to give a discount to customers who use cash, check, or debit for their purchases. Business owners will be able to give a discount based on the card network (Visa, MasterCard, etc.) but they won't be able to discriminate against small issuers (Bank of America vs. Madison County Employees Credit Union).
Passing the bill means would mean lower profits for credit card issuers unless they made some changes to consumer costs of credit. More credit card issuers could begin charging an annual fee on credit cards. They may even nix costly reward programs in an effort to generate more revenue.
These amendments have been approved by the Senate and now await approval from the House before the President can sign it into law.
Source: Forbes.com