EU against interchanging fees: Should we save the Euro at all costs?

The European Commission likes to talk about money. Its natural inclination to harmonize the market in all the countries of the Union pushes it to another workspace: interchange fees, a commission paid by the bank of a merchant to the bank of the consumer when it makes a purchase by credit card.

French website Bursorama reminds us that the Eurocrats want these fees down; even though the 2005 Spanish experience shows that consequences have been negative for consumers, who have directly suffered an increase in costs, charged and prices.

The card transaction system works with companies such as Visa and MasterCard.The card payment system works very well thanks to the market, despite the fact it is unknown by most card users. Unfortunately, the reduction or elimination of interchange fees is not a good measure for the portfolio of citizens who are unaware of the consequence of the regulation. If a reduction takes place the transaction costs will no longer be supported by merchants and the consumers will be “welcome” by their bank to pay the difference.

The reduction of the interchange fees has been set up in Spain and the results have been unsuccessful. Bank charges associated with the use of cards rose about 50%, while at the same time; merchants have not lowered their prices as it was planned. Such unfulfilled promise remembers French VAT reduction for restaurants. The VAT reduction was supposed to lead to a decrease in prices for consumers.

Not only the Spanish experience but also Australian and U.S.’ cases demonstrate that interchange fees reduction is negative. And yet, the European Commission, looking to achieve and uphold its habit to harmonize the market, now wants to regulate interchange fees.

However, the issue of exchange fees is just one example of many that we need to acknowledge and feed the debate whether to save the euro at all costs. And the underlying problem of this is that the blind ideology leads to the impoverishment of the people.

*Read the original article here (in French).

About the Author

The Corner
The Corner has a team of on-the-ground reporters in capital cities ranging from New York to Beijing. Their stories are edited by the teams at the Spanish magazine Consejeros (for members of companies’ boards of directors) and at the stock market news site Consenso Del Mercado (market consensus). They have worked in economics and communication for over 25 years.

Be the first to comment on "EU against interchanging fees: Should we save the Euro at all costs?"

Leave a comment