August 03, 2010
-
CA Battles Against Debit Card Fees, Pt.1
It's time to catch a merchant.California State Senator Jenny Oropeza (D-Long Beach) has joined the battle against high debit and credit card transaction fees. Transaction fees which are referred to as interchange fees are the fees that major credit card networks charge merchants each time you swipe your card. A portion of the fee goes to the merchant's bank, to the consumer's bank, and the major credit card company. To compensate for the interchange fee, some merchants have begun to charge their customer an additional fee when using debit rather than credit. Oropeza introduced a new bill aimed at prohibiting merchants from charging these fees that she says are unfair. The Senate approved the bill last month which will be taken up by the Assembly soon.
Most concerning to Oropeza is the fact that debit card use has grown to greater heights than credit card because lower income families do not have access to credit. These extra fees place a greater burden on those individuals who can least afford it. Furthermore, Oropeza maintains that since most government assisted programs are paid with debit card, the fee costs taxpayers. Laws that were passed years ago, prior to the existence of debit cards, prohibit merchants from charging these extra fees for credit card use. The extra fee ranges from $ 0.45 to $1 per purchase. With the implementation of her new legislation, Senator Oropeza is asking that the law be amended to include debit card usage.
Although the terms of merchant's agreements with the major credit card networks, Visa and MasterCard prohibit them from charging any type of fee for debit or credit, it is often difficult for them to control merchants from doing so. For this reason, Visa and MasterCard support the Senator's bill which will provide extra assistance in imposing stiff penalties for breaking the law. However, the bill also has its opponents. Read part two to hear more from the other side.