The New York Times:
When Steve Franklin bought four plane tickets on Qantas last June, he faced an unexpected expense: a surcharge of 7.70 Australian dollars on each of the 136.70 dollar ($126) tickets — just for using his Visa credit card.The law of unintended consequences strikes again. Promise what they may, and try as they might, government is not smarter or more efficient than the free market. There ain't no such thing as a free lunch.
Mr. Franklin, who planned to fly his parents and his 7-year-old twin daughters from Sydney to Adelaide, knew that changes to credit card rules had affected the cost of using plastic, but the extra 5.6 percent seemed excessive.
The charges were the consequence of changes in credit card rules in Australia that were aimed, in part, at reducing the cost of hidden fees for using plastic. But the law, passed six years ago, also allowed merchants to tack on new charges, and many have done just that, in some cases with fees that exceed the old ones.
Now, as Congress debates how to rein in credit and debit card companies in the United States, Australia’s experience is being pointed to as an example of just how tricky that can be: for one thing, if regulators limit one fee or rate, banks are likely to find another way to keep revenue flowing.
As in Australia, the stakes are high in the United States. American merchants, like their counterparts Down Under, complain that the high fees they must pay credit card companies and banks to accept their cards force them to increase prices on everything they sell — even for people who pay with cash — to make up the difference. In the United States, the Government Accountability Office last week issued a report showing that consumers who did not use credit cards “may be made worse off by paying higher prices for goods and services, as merchants pass on their increasing card acceptance costs to their customers.”
1 comment:
The obvious solution that is left unsaid is that these businesses are free to raise such fees themselves independent of government action. That would lead some businesses to keep the current structure, some to apply fees only to credit card transactions, and others to come up with another structure. This would lead to a marketplace competing for customers' business based on price at point of purchase. Most importantly, it would allow consumers to send an actual signal to the marketplace as to their overall preference in fee systems. Such a system exists for gas stations in the Northwest, where AM/PM actively markets lower gas prices if paid in cash and charges a transparent, small, flat fee for the use of a debit card.
But that's not what these merchants want. They want a single fee system for everyone to eliminate a spurce of competition and lock in their own profit stability. The sad fact is that most Americans don't understand this, and instead fall for idiocy like "fairness" instead of looking at the real and unintended consequences of such policies.
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