High fees and big claims
Would you believe that high fees are good for consumers? No, us neither. But that's what research and advocacy that has been funded by card schemes like MasterCard and Visa would like you to believe.
The Reserve Bank of Australia is currently looking at reducing interchange fees. This is a fee you may not be familiar with, but it's levied every time you use your credit or debit card.
CHOICE has analysed research paid for by credit card companies and big banks dating back to 2002. We've found evidence of a sophisticated campaign that aims to keep interchange fees high for consumers.
Even worse, the big card companies are using selective evidence to claim that lowering interchange fees will be bad for all consumers!
Why should I care about interchange fees?
Do you like paying more than necessary at the cash register? If not, interchange fees affect you.
An interchange fee is what your bank charges the merchant's bank whenever you choose to pay by card. Interchange fees are set by card schemes – like Visa, MasterCard and American Express – but are collected by banks. Since 2003 the Reserve Bank of Australia has required that interchange fees are kept at a mid-range level, 0.5%, but it's now looking at making the fees lower.
Interchange fees are hidden in bank-to-bank costs, but they ultimately lead to all consumers paying higher prices for goods and services – whether you pay by card or not.
On the other hand, reducing interchange fees will reduce the costs to businesses for accepting cards, which will lead to reduced prices for consumers.
Don't believe the hype: misleading MasterCard information
In a submission to the Senate References Committee on Economics, CHOICE has warned that research and advocacy claiming to be concerned about consumer costs may be funded by corporate interests and present misleading or selective evidence about the impact of changing interchange fees.
CHOICE has found that MasterCard, Visa and major banks have funded a large body of research as well as what appear to be front-groups to advocate for keeping interchange fees high. These businesses are the major beneficiaries of high interchange fees, but they're arguing that consumers will be harmed if fees are reduced.
The revelation comes in the wake of MasterCard emerging as the only known funder of the Don't Change My Interchange campaign being pushed by a mysterious group going by the name of the International Alliance for Electronic Payments (IAEP) – which we've previously warned consumers about.
And now CHOICE is telling the government that claims made in industry-funded research and advocacy are misleading or, at best, presenting highly selective evidence. The industry-funded research ignores the angle that lowering interchange fees will stop all consumers subsidising rewards points for a small minority.
You can read CHOICE's detailed thoughts on this interchange issue and see the list of industry-sponsored research in our submission to the Senate Inquiry into Matters Relating to Credit Card Interest Rates.