EasternTraveler

Surcharging should be illegal. Include the cost in the price, offer a cash discount if you like. But do not surcharge.

Majuki

Admittedly, I wasn't looking closely to see what card type people were using most often. You're right that most transactions will be over the V/MC networks rather than the US Debit network in the US.

tmiw

If anything, the US rules might theoretically be more in favor of the average consumer as it's not supposed to matter what network's used for debit cards (whereas in Australia, I think they can surcharge if someone chooses Visa or MC instead of EFTPOS on the terminal). Of course, in practice, surcharging tends to be more anti-customer in the US in practice for reasons already mentioned.

tmiw

So, it looks like Senator Durbin wants to require credit cards to support two networks much like what debit cards do now. At least there was already support for multiple network routing with the latter; I'm not sure how it would work in practice for the former. It would be cool seeing combo Visa and AmEx cards from the likes of Chase, though (as an example).

Oh, and bringing it back to the topic of this thread, I suspect a lot of places will still surcharge for credit cards even if run on a network other than the big four. A hard cap on fees (like what the EU has) might be the only thing that gets the places doing it to stop, but that's of course not guaranteed.

cbn42

Interesting proposal, I wonder how it would work in practice. Many banks already issue both Visa and Mastercard credit cards, so it may not be a huge leap to put them both on one card. But unlike debit card networks, which are all already interoperable and have been for years, this will require major software changes and may also confuse customers.

I personally think a European-style fee cap would be a better way of accomplishing the same thing, but that may be less palatable to Americans than forcing competition.

tmiw

I suspect this would require all credit cards in the US to be reissued with a US Common AID-type thing programmed into the chip. Not exactly trivial for sure and would likely be the final nail in the coffin for whatever PIN support still exists on cards issued here.

I actually think a hard cap might be supported by a plurality of the public (if not the majority), but whether there's the political will to do that is a different story. And as you mention, that probably doesn't exist.

cbn42

Yes, definitely not trivial. I would assume there would be enough time that the new cards could be phased in as the old ones expire.

I think it's a bit of both. Opponents will frame it as "price controls" and "government regulating the free market", which are buzz words that will rile up Americans quickly. On the other hand, who can argue with promoting competition and giving merchants more choices?

My concern, however, would be that with 4 major card networks, the industry may function like an oligopoly and none of them will be willing to undercut the others in price.

tmiw

My most recently issued cards seem to have significantly far out expiration dates (for example, I have a couple of cards expiring in 2026 and 2027), so I could see that taking a while unless the legislation forces an accelerated timeline.

The thing is, it's not unprecedented to cap interchange. As we all know, US law already caps debit card interchange even more strictly for large issuers than the EU does (0.05% vs. 0.3%). That said, I can see there being a small issuer exemption in the proposed legislation as well, so it remains to be see whether it'll actually decrease credit interchange much.

I think the idea is that an issuer could have, say, STAR or PULSE be the second network and not necessarily another one of the four credit card networks. I can already imagine the number of complaints to issuers about transactions not getting points because the merchant ran it on something other than Visa/MC/AmEx/Discover without letting customers know that was happening.

cbn42

Why would an issuer want to do that? The debit networks (like STAR and PULSE) pay them a lot less than the credit networks. While merchants would prefer the debit networks due to lower costs, issuers would prefer the expensive networks because of the higher costs.

tmiw

If issuers were mandated to have a second network by law, anyway, it would probably be less messy from a contractural standpoint to choose a network other than one of the big four even if it meant less coming in. Not to mention that it wouldn't preclude the debit networks from increasing what they charged.

(BTW, I found out today that apparently business debit cards and small ticket transactions command much higher interchange on the various debit networks compared to regular debit cards and larger transactions. The highest fees on there don't seem to be much less than a lower to mid tier credit card, really.)

mia

I imagine that the large bank issuers would create a new credit card processing network, just as they created the forerunners of MasterCard and VISA. Much would depend on the language of the law, which might preclude networks owned by card issuers.

rasheed

Yes, I know Chase's private network is ready (although it rides the rails of Visa, it is supposed to be separate). At one point the big credit networks were buying the debit networks. But there is not a lot of incentive unless there is significant reduction in costs and/or reduction in rewards. So, we will have to see what happens.

tmiw

Considering that the Durbin Amendment added a requirement for two unaffiliated networks for debit cards, I doubt either a new network controlled by the issuers or use of the existing credit network's debit network would fly with this proposed legislation. That leaves either dual branded credit cards (e.g. Visa + AmEx) or use of an existing debit network as the second network, at least without another player entering the market.

cbn42

I don't see why a network controlled by the issuers wouldn't count. For example, Visa + ChaseNet are two unaffiliated networks, even if they share some back-end infrastructure.

jamesinclair

It seems like in the NYC metro are "voting with your wallet" and avoiding places that charge a fee is getting harder and harder. It's spreading like the plague. And Im seeing it at places with all kinds of price points.

I have no issue paying with cash if my total is $8.27. But when my total is $130? Come on.