Illinois Takes a Swipe at Interchange Fees—and Misses
Governments charge a fee for almost everything. When private companies do it, some legislators reach for a ban.
The argument in four steps
- Illinois banned card fees on the sales tax portion of a transaction.
- A federal court has already blocked it, since federal law lets banks charge those fees.
- Even if it stood, merchants would rebuild their payment systems to save a fraction of a per cent.
- The relief small businesses actually want is available by other means, and cheaper.
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Terms in this piece
- Interchange fee
- What a merchant’s bank pays the cardholder’s bank to process a card payment. Usually a small percentage of the sale, plus a flat charge.
- Price ceiling
- A legal maximum set below the market price. The usual result is a shortage or a workaround rather than the saving that was intended.
- Vendor discount
- Letting a merchant keep a slice of the sales tax he collects, as payment for the work of collecting it on the state’s behalf.
“Swipe fee prohibitions play well with the public.”
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