Crocodile Tears From the Credit Card Industry

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The Wall Street Journal reports on the latest middle finger from the credit card industry:

Just two months after one of the most controversial parts of the Dodd-Frank financial-overhaul law was enacted, some merchants and consumers are starting to pay the price. Many business owners who sell low-priced goods like coffee and candy bars now are paying higher rates—not lower—when their customers use debit cards for transactions that are less than roughly $10.

That is because credit-card companies used to give merchants discounts on debit-card fees they pay on small transactions. But the Dodd-Frank Act placed an overall cap on the fees, and the banking industry has responded by eliminating the discounts.

“There will be some unhappy parties, as there always is when the government gets in the way of the free-market system,” says Chris McWilton, president of U.S. markets for MasterCard Inc.

The sheer gall on display here is just mind-boggling. If card companies were really interested in a free market, they’d remove the clause in their standard contract that prevents merchants from charging higher prices on credit and debit card transactions. Merchants would then be free to pass along swipe fees to their customers or not as they saw fit, and the free market would determine the outcome. But they’ve resolutely refused to do that, and since Visa and MasterCard are an effective monopoly, merchants have nowhere else to go.

Over the past decade, Visa and MasterCard have spent billions of their marketing dollars on commercials like the one on the right, trying to persuade people that only a real self-centered bastard would so much as think of using cash for a small purchase these days. This worked largely because merchants didn’t fight back. But now that the marketing campaign has successfully trained consumers to whip out their cards for anything more expensive than a candy bar, and it’s too late for merchants to do anything about it, the fees go up.

Don’t blame Dodd-Frank for this. Blame the card companies. They’ve done everything they can to prevent a free market in plastic, and this is the result.

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Which is also a pretty great way to describe Mother Jones' mission: People coming together around the truth to hold power accountable.

And right now, we need to raise about $400,000 from our online readers over the next two months to hit our annual goal and make good on that mission. Read more about the information war we find ourselves in and how people-powered, independent reporting can and must rise to the challenge—and please support our team's truth-telling journalism with a donation if you can right now.

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