Wall Street Doubletalk: Swipe Fees Won’t Go Down, But Rewards Will Go Away
That’s right. The giant Wall Street banks and their “experts” are throwing every argument they can think of against credit card competition. Even when they blatantly contradict themselves.
For years, big bank advocates have been threatening that bringing competition to credit swipe fees would end credit card rewards programs — despite ample evidence to the contrary.
But bank industry experts also say that if the Credit Card Competition Act passes, swipe fees actually won’t go down because banks will only use networks that guarantee them high fees. For example, a prominent banking industry consultant said:
“If the CCCA passes, issuers are going to choose an alternative network that keeps their interchange revenues up. They aren’t going to take less in interchange revenue.”
Huh? Big bank advocates have also been shouting that merchants won’t pass along savings from credit card competition reform – and now they're saying those savings won’t exist in the first place?
That giant sucking sound you hear is from the last remnants of Wall Street’s credibility going down the drain.
It’s hard to believe when they threaten and say completely contradictory things, but the Wall Street bankers are wrong about all of it. Let’s set the record straight:
- Having multiple networks on a credit card is very easily doable. It happens on debit cards here and it happens in many places overseas. In fact, JP Morgan Chase announced they would voluntarily have multiple networks on their credit cards … in France (read it here).
- The estimate is that competition on credit cards will save merchants and their customers $17 billion per year (read it here).
- U.S. retail is very price competitive and passes through savings to customers at a rate of nearly 70% (see page 19 here). Banks are not very price competitive and only pass through 25% (read the court’s quotes of Professor Hausman’s findings at page 53 here).
- Rewards haven’t gone away in other countries and won’t go away here. At most, they might go down by less than one-tenth of one percent <0.1% (read it here).
The more Wall Street bankers try to convince you that competition is bad for credit cards or the economy, the more they not only have to resort to misinformation but to flagrantly contradicting themselves.
COMPETITION IS BETTER FOR EVERYONE
IT'S TIME TO PASS THE MARSHALL-DURBIN AMENDMENT