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How to Balance a CheckbookCredit Card Fee Legislation May Impact Reward Checking Accounts
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ON BY Ken Tumin
Both reward checking accounts and credit card rewards may be affected if new legislation that's being considered in Congress becomes law. The legislation that is currently being discussed is H.R. 2382: Credit Card Interchange Fees Act of 2009. Banks and credit unions are fighting this legislation. Dan Mica, the president of the Credit Union National Association, is vocal against this legislation:
This BusinessWeek article has a review with opinions of this legislation from merchants' point of view. In the article it was noted that debit card transactions are also expensive for merchants. Here's an excerpt:
I wonder how much reward checking accounts have increased the use of debit cards. Before I signed up for a reward checking account, I always just used credit cards.
I have more discussion on interchange fees and reward checking accounts in this July post.
Credit unions use interchange revenue to finance card programs and to ensure that their members have access to the same services provided by other, much larger financial institutions - and typically more affordable. If interchange revenue were reduced or eliminated, credit unions would be forced into the impossible decision of raising fees for our members - or eliminating our card programs altogether.
This BusinessWeek article has a review with opinions of this legislation from merchants' point of view. In the article it was noted that debit card transactions are also expensive for merchants. Here's an excerpt:
We discount 3% for cash sales to try to recover the cost on credit cards. The problem we’ve run into now is more customers use debit cards than cash. Debit cards are considered a 'cash transaction' so we really get hit hard on those charges. We are debating now whether to consider not giving a discount on a debit card. That would antagonize the customers though, so we’re caught in a catch 22.
I wonder how much reward checking accounts have increased the use of debit cards. Before I signed up for a reward checking account, I always just used credit cards.
I have more discussion on interchange fees and reward checking accounts in this July post.