Crocodile Tears From the Credit Card Industry

Crocodile Tears From the Credit Card Industry

—By Kevin Drum

The Wall Street Journal reports on the latest middle finger from the credit card industry:


The sheer gall on display here is just mind-boggling. If card companies were really interested in a free market, they'd remove the clause in their standard contract that prevents merchants from charging higher prices on credit and debit card transactions. Merchants would then be free to pass along swipe fees to their customers or not as they saw fit, and the free market would determine the outcome. But they've resolutely refused to do that, and since Visa and MasterCard are an effective monopoly, merchants have nowhere else to go.

Over the past decade, Visa and MasterCard have spent billions of their marketing dollars on commercials like the one on the right, trying to persuade people that only a real self-centered bastard would so much as think of using cash for a small purchase these days. This worked largely because merchants didn't fight back. But now that the marketing campaign has successfully trained consumers to whip out their cards for anything more expensive than a candy bar, and it's too late for merchants to do anything about it, the fees go up.

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In a way the higher fees would have allowed a new competitor to step in and then lower fees. But no, now we've made it too expensive.

Again, barriers to entry, and it couldn't have come at a better time when a whole lot of new players are looking to move in this area.