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A court battle brewing between credit card companies and major retailers could end up costing American consumers.
Five million retailers, including the likes of Payless ShoeSource, the National Association of Convenience Stores, and the National Restaurant Association, filed an antitrust litigation suit against Visa, MasterCard and 13 major credit card issuers.
The suit alleges the defendants are acting as a monopoly by keeping fees they charge merchants for credit card transactions artificially high and that those fees would be lower in a free market environment.
Right now, banks and issuers charge retailers a 2 percent "interchange" fee, according to an article on CNBC.com chronicling the lawsuit. Some analysts worry the fee could be slashed to 0.5 percent, severely cutting into bank profits.
(One analyst estimated Chase could lose $5.38 billion in 2012 revenue, while Bank of America would see $3.68 billion go down the tubes, according to the report.)
So why should you care about bank profits or a legal war between issuers and retailers? Here's why.
The effect could be analogous to what happened when federal regulations capped debit card interchange fees.
That's when banks started charging all types of other fees to customers, such as checking account maintenance fees (aka no free checking), to make up for the loss in debit interchange fee revenue. The most notorious fee was the debit card usage fee, which barely got off the ground before banks axed it in the face of a major consumer backlash.
The question is: Would you see more cards with higher interest rates or annual fees if issuers suddenly find the bottom line lacking due to an unfavorable settlement or ruling in this case? It's quite possible, and the case bears watching.
What type of changes to your credit card would make you walk away?
Follow me on Twitter: @JannaHerron.
I will continue to game the system anyway I can by not paying any interest and funneling all the expenditures I can through rewards cards. As rewards levels and or annual fees change, I will adjust. If it comes to a point where gaming the system becomes more of a headache than it's worth, I'll just pay cash or use debit (if it's still free). This is not worth worrying about.
Credit card fees are a tax on every item that anyone buys. Stores are not allowed to charge extra if you use your credit card, therefore they are forced to raise prices for everyone, including those people who pay cash.
I don't use credit cards, so it will benefit me if the fees are lowered because I will see cash prices go down. I think the real solution is to allow stores to use a combination of
1) Charging extra when people use credit
2) Charging the cardholder for the convenience of a revolving credit line
All those extra perks and points and junk are really just kickbacks from fees that you already paid - so what's the point.
Get real.