Not Especially Surprising

That Visa and other credit card companies found another way to squeeze fees out of consumers and businesses shouldn’t shock anyone.  According to the New York Times, in an article published yesterday, businesses pay a higher fee to banks, and thereby to credit card companies, each time you sign for a Debit card purchase rather than using your pin. Thank you Visa for pioneering this lovely scheme.

The whole piece is worth a read.  I had always wondered why Chase (my bank) only gives you reward points when you sign for a purchase made on your debit card.  It’s so much easier to use your PIN, and, after all, isn’t the point of debit to “debit” your account rather than use “credit”?  Now I feel stuck between a rock and a hard place — on the one hand I like getting those points (they really do add up) but on the other I didn’t like knowing, when I went to the grocery store yesterday, that Kroger was going to pay more for that purchase because I signed for it.

The Times article suggests that the Justice Department (i.e. the Antitrust Division) is looking into the matter.  My sense is that something will happen, not least of all because the Division leaned pretty heavily on credit card companies for schemes like this even during the Bush years.  In 2008, for example, even before the case got to any kind of settlement phase, the Division got the major credit card companies to stop making stores treat debit cards differently from credit cards.  There was simply talk of going after them for that transgression (obviously some extensive talk) and the companies chose to ease their restrictions.

This seems like a similar case, treating one kind of transaction differently than another, even though they are essentially doing the same thing.  Particularly now that the Times has shed light on the practice, I assume the credit card companies will either change their practices or enter into a settlement agreement with the DOJ about how to change them.

Just assumptions.  But I hope I’m right. This really is an abhorrent practice.


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