While firms may estimate large consumer and business savings with interchange regulation, credit union members may see the value of their membership decline with lost institutional income.
In yesterday’s New York Times, Albert Foer, president of the American Antitrust Institute, takes banks to task for charging customers additional fees (i.e. interchange) for using debit and credit cards. While not citing a source, Foer says,
“If the United States were to reduce the interchange rate from 2.0 percent to 0.5 percent, the savings would be $36 billion per year, less some relatively small offsets.”
If credit union’s interchange income was reduced in total by 75 percent (from Foer’s stated 2.0 to 0.5 percent), the lost revenue would drastically affect credit union non-interest income and the eventual value returned to members.
Using Callahan & Associates’ Non-interest Income Survey data, credit and debit card interchange accounted for 28.3 percent of credit union non-interest income (fee income and other operating income) in 2009, totaling $3.3 billion. If reduced, the figure would fall to $823 million. As a percentage of average assets, interchange revenue would fall from 38 basis points to just 9 basis points.
Do your members know how interchange helps the credit union and subsidizes the true cost of providing debit and credit services?