Protect Your Credit Union Debit Card

The United States Senate is considering passing the Financial Services Reform Bill, which includes the Interchange Amendment. This proposed amendment will negatively affect credit unions and credit union members who rely on debit cards to make purchases.

What is an interchange fee?

Answer: When a consumer makes a purchase with a debit card, the merchant is paid and the financial institution that issued the card receives an interchange fee from the merchant. As a credit union, interchange fees gives us the income we need to run our debit card programs, including administration and reissuing cards in cases of merchant fraud.

How will the interchange amendment affect credit union members?

Answer: The provision will allow merchants to discriminate against certain debit cards due to the cost of the card. This could make consumers feel pressured to apply for debit cards from larger issuers which are likely to have terms that are less member-friendly than credit union cards.

How has this type of reform affected others?

Australia’s experience demonstrates that consumers suffer when the government regulates interchange fees. In 2003, the Australian reserve bank mandated that card issuers reduce interchange fees by 50 percent and eliminate “no surcharge” rules. A 2008 study by London economists, however, concluded that this intervention harmed consumers in ways neither intended nor foreseen. In fact, the study showed that, on average, the annual fees paid by consumers for standard credit cards increased by 22 percent, while annual fees for reward cards increased by between 47 and 77 percent. As a result, Australian cardholders paid approximately AU$480 million more in additional fees on credit cards each year. We should not repeat this experience in America—not when our constituents might be priced out of banking services altogether or when those already stretched taxpayers who can afford the additional fees will be forced to shoulder this additional burden.

What can you do to help stop this from passing?

Answer: Call and/or e-mail your Member of Congress about the Interchange Amendment, and stress to him or her the importance of removing it from the Financial Services Reform Bill.