Lawmakers look at trade-offs over ‘swipe fees' that generate rewards points

Credit card companies offer a service. They provide people with a plastic and metal card allowing them to make cashless payments across the world. In exchange, those credit card companies get an interchange or "swipe fee" from the retailer. Texas lawmakers are following some other states in debating whether they need to regulate those fees more tightly.

Every day, consumers care about these fees because the money often generates popular rewards and points programs. The fees also help credit card companies reimburse consumers for fraudulent purchases.

It's setting off a battle of trade-offs, where financial institutions, credit card providers, large and small retailers are debating who needs to carry more of the financial burden. These fees can generate more than $100 billion a year across the country, according to a bill analysis. Both supporters and opponents of the change argue they have small business interests at heart.

The author of the bill argues major banks and the two main credit card companies benefit too much from the status quo and aims to set public disclosure requirements, set a fee schedule, stop competitors collaborating to set higher fees, and prevent penalties from a store having discounts if a customer uses a gift card or cash.

“Larger companies get to negotiate the fees but if you’re a small business owner, you pretty much get dictated what these fees are going to be," Sen. Kelly Hancock, R - North Richland Hills, told 온라인카지노사이트 5.

Several business groups and companies disagree.

Measuring trade-offs

The business group Americans for Free Markets argues that changing the proposal would benefit large retailers more than small businesses. Large stores do most of the business in the state and would get most of the savings. Some small businesses may need to pay for new equipment of software updates if the change goes through.

In a study conducted by Jon Hockenyos from TXP consulting, the economic analyst estimated that out of a nearly $252 million savings by retailers in Texas a year, 40% of the savings would go to major stores like Walmart, Amazon, Target, and Home Depot. Smaller stores, "true mom-and-pop style businesses," would save $243 a year.

In an interview with 온라인카지노사이트 5, Hockenyos said smaller stores would have to buy new payment systems to separate the fee from the sales tax portion of the process, something he predicts may cost roughly $2,300. Larger companies could handle this with in-house IT departments.

“At the end of the day, I’m sure there’s going to be a bunch of individual answers but the bottom line is it’s a lot of hassle and some expenses for not much benefit for a lot of people,” said Hockenyos.

He looked at the interchange fee being 1.8% for credit cards and .73% for debit cards from the most recent Texas Comptroller data from sales tax collection for a segment of the consumer business in Texas.

Lawmakers, said Hockenyos, will have to decide whether changing the status quo is worth the trade-offs. Providing a secure, cashless service, he said, has plenty of benefits.

“It’s not only convenient for the consumer but it’s actually convenient for the merchant too in many cases because handling cash takes more people, oh, and by the way, it’s pretty convenient for the cash to walk out the door," said Hockenyos.

Question of competition

According to a bill analysis of the proposal, two companies control 76% of the card network - Visa and Mastercard - and ten large banks control four-fifths of the credit cards issued.

Credit card processing fees are some of the highest in the world, according to the author, because of a lack of oversight and transparency, more than doubling over the last ten years.

“These swipe fees are charges to the merchant. The reality is, the consumer is paying for it, so they ad it into the cost of it hits their margins," said Sen. Hancock.

Americans pay six times the rate of Europeans, according to the bill analysis. Europe has tighter rules and lower caps on fees. That also means Europeans see fewer and smaller rewards programs.

Battle in the legislature

SB 2056 has already passed the Business and Commerce Committee in the Texas Senate. Its companion bill by Rep. Jared Patterson, R - Frisco, was left pending in a similar committee in the Texas House.

In the Senate committee, the National Federation of Independent Business, the Texas Restaurant Association, HEB, QuickTrip, Sam's Club, Walmart, Albertsons, Starbucks, Landry's, Home Depot, and other retailers supported the change.

American Express, Citi, Wells Fargo, the Credit Union Association of Texas, United Airlines, Mastercard, and VISA opposed the change.