Interchange Fees and CUs

Recently you may have seen something in the news about interchange fees and wonder what it all means. An interchange fee is what a merchant pays to the financial institution that issues a consumer’s debit card. The interchange fee is a source of income for the card issuing credit union to run their debit card program. Without it credit unions will have to impose a fee for this currently free service.

Since credit unions are not-for-profit financial institutions that operate on a narrow margin and return any so-called profits to their members in the form of increased savings rates, lower loan rates and service fees. Something like this, that would cause a fee increase in the services we provide our members – is not taken lightly. As a cooperative our members are also our owners, and unlike for-profit financial institutions we don’t see this as an opportunity to raise fees and profits.

Currently the interchange amendment is part of the Senate-approved Financial Reform Package pending in Congress. Proponents of the legislation argue that the so-called savings in the merchants cost of business will be passed along to consumers – when in reality it will merely shift it onto the backs of consumers at their card issuing bank or credit union, since nothing in the legislation requires retailers to pass their savings on to the consumer.

In response to this hastily attached amendment, there is a national movement underway to help Congress understand the negative effect of this legislation on credit unions and consumers across the country. The message is clear: Eliminate the Senate’s interchange amendment, which will increase consumers’ costs to use a debit card.

 Alan P. Smith

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