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Thursday, June 17, 2010

Financial Regulation and Credit Card Rewards

Government financial regulation threatens services to consumers and businesses in various ways. That includes the Senate’s vote to slap price controls on debit interchange fees.

A June 15 Smart Money article pointed out some of the potential fallout if these price controls are imposed:

• “Credit-card rewards programs have long been a staple of the industry, but new legislation could lower the benchmark on such programs by tamping down on a revenue stream that helps fund them – the fees businesses pay to accept plastic.”

• “Consumers could end up paying for some of the price. Rewards programs are largely subsidized by interchange fees. If those funds are suddenly slashed, some issuers may scale back their debit-card rewards or shut down their programs entirely.”

• “What’s more, a pullback in debit-card interchange revenue could, over time, force some issuers to scale back credit-card rewards programs as well…”

Read the entire piece here.

Raymond J. Keating
Chief Economist
Small Business & Entrepreneurship Council

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