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Following last week’s decision by the Reserve Bank of Australia (RBA) to maintain reforms governing the fees and rules associated with credit and debit card transactions, the Food Marketing Institute (FMI) group VP/government relations Jennifer Hatcher said the trade group “applauds the decision by the Reserve Bank of Australia to preserve interchange or swipe fee reforms, which have increased transparency and competition and lowered the rates — now saving Australian retailers and consumers more than $1 billion a year.”
Noting that Americans deserve the same relief, “especially in today’s economy,” Hatcher said that swipe fees, “unchecked by competition or any government oversight…hidden from consumers, fixed by the credit card companies and banks and exceeding the combined total of annual fees, penalties and cash-advance fees… cost nearly $50 billion a year.”
From a historical perspective, credit card companies and banks extract an interchange fee from every plastic transaction. In the U.S., the fees average about 2 percent, among the highest in the industrialized world.
RBA reforms instituted from 2003–2006 brought the average fee down from 0.95 percent to 0.50 percent. Competition between the Visa and MasterCard networks has led to rates as low as 0.30 percent for credit card transactions and a flat fee of 3.6 cents for debit card payments.
Virtually every developed economy in the world has ruled that interchange fees are fixed by banks and card companies in a manner that violates antitrust laws or are investigating these practices.