I read an interesting article on TheHill.com this week, about Congress taking action against credit card companies. That sounds nice and overdue, but the only problem is that they are fighting for the second best constituent, rather than the first. If only they worked that hard for us....
You may not know this, but the convenience store association has a very powerful and smart lobby. Just like any group, they hit on Congress when they feel they are being wronged. The big trouble is that the credit card companies aren't really wrong, but the lobby gives contributions, and consumers don't. Here is the issue.
Merchants pay a percentage of gross sales to the credit card companies, usually around %1.75 ,others charge higher, hence the "We Don't Accept AMEX" sign at some merchants. Now, different cards pay different rates. You have o ne of those Frequent Flyer or Cash Back cards? Well, the merchants pay higher for that card. In essence, the merchants is partially financing the rewards you get, and they don't like it.
Just how much more? Not much really. It is usually 2.0% , but that extra .25% adds up. Revenue from that has jumped from $6.6 billion in 2006 to $7.6 in 2007. That cuts out a lot of margin for error for businesses with low profit margins like convenience stores. So, if merchants need to jack prices up .25% , then do it, right? Why do it when Congress can do it for you... they pay them anyway.
The unfair part, of course, is how Congress will jump all over the banks for something they can pass on to consumers, but when regular citizens are getting charged $39 over the limit and late charges for being $3 over their $300 credit card, they have no recourse, becuase Congress got help writing the laws from the banks themselves. Well, this IS the same Congress that let the Pharmaceutical Industry write the Medicare Part D bill...
Maybe it's time we make up our own lobby - except we don't let Congress know we're working for average citizens. A REAL group looking out for us, not like the BS that AARP pulls off.... If you have an idea of what to name it, feel free to leave a comment..