Europe and the Price of Plastic

Wall Street Journal | July 18, 2013

Memo to Brussels: There’s still no such thing as a free lunch, even if you use a credit card. Credit cards exist because they benefit everyone involved. Consumers like the convenience and the cash-flow flexibility. Merchants accept them because they bring in business and allow them to handle less cash. And the banks issue cards and process payments because they make money doing it.

It’s that last point that has the European Commission worked up. In a draft proposal to be published next week, the Commission is moving to cap the fees that card companies charge merchants—so-called interchange fees. Merchants don’t like paying these fees, which is no surprise. What is surprising, or at least disappointing, is that the Commission is so willing to do their dirty work at the expense of the other parties involved, supposedly because lower fees can only help consumers.

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