N.H. House weighs credit card fee cap

A bill that would limit credit and debit card fees has New Hampshire retailers and banks going head to head.The fee in question — the interchange fee — is the amount that a credit card user’s bank charges the retailer’s bank. The fee is usually passed on to the retailer as a deduction from the sale. House Bill 1319 would limit that fee to 1 percent for state-charted banks.The problem with such fees, according to the bill’s sponsor, Rep. John Hikel, R-Goffstown, is that “as a merchant you don’t know what that card is going to cost you.”The fee charged depends on the kind of card used and what the person purchases.For Hikel, who owns an auto repair shop, fees vary from 0.65 percent to 4.76 percent. Hikel alleges that the fee subsidizes various benefits to the cardholder, so “I end up paying for the customers’ free gifts and miles.”Hikel only finds out the amount, he said, when he gets his credit card statement.For John Dumais, president of the New Hampshire Retail Grocers Association, the problem is simply the amount the retailer has to pay.Grocers run on a tight margin — about a 1 percent profit on food for larger chains and a half-percent for independent grocers. Gas is a loss leader, he said.”It’s a hardship when the cost is 3 percent and the profit is under 1 percent,” Dumais testified in support of the bill.The average cost is closer to 1.75 percent, said a spokesperson for MasterCard. That’s the “blended rate” that merchants usually pay, though each deal with the merchant and his or her bank is different.It wasn’t just credit card companies that spoke against the cap.The bill would “undermine the free market” and “create an un-level playing field,” said New Hampshire Bankers Association President Christiana Thornton.Federal law already limits such fees — 21 cents plus 4 basis points — but that’s only for banks with $10 billion in assets. Thus the limit doesn’t apply to smaller banks based in New Hampshire — which, federally chartered or not, all have assets of less than $2 billion.If the bill passes, there would be three sets of rules: a federal cap for large national banks, a state cap for small state-chartered banks, and no cap at all for smaller federally chartered banks.In New Hampshire, the federal cap applies to Bank of America, TD Bank, Citizens Bank and Sovereign Bank.There are 18 state-charted banks in New Hampshire that would be affected by the state cap and six in the state that wouldn’t have any cap.It isn’t that banks don’t have costs associated with credit cards, or that the merchant doesn’t get any benefits, contend opponents of the bill.The merchants get secured guaranteed payment processed much more quickly than checks, and without the hassle. Card companies added that customers are more likely to buy, and buy more, with a credit or debit card than with cash. And it’s the bank and card company that are on the hook for fraud or nonpayment, not the merchant.The fee, said Thornton, provides “only partial reimbursement to card issuers for the services they provide and the risks associated with these transactions.” A price cap wouldn’t cover costs and “make it entirely likely that some smaller institutions will need to discontinue issuing debit and credit cards, just to avoid losses in this area.”Consumers will then move to banks that can offer those services, hurting the state’s community banks, she said. — BOB SANDERS/NEW HAMPSHIRE BUSINESS REVIEW

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