"Behind the credit card, ubiquitous in American economic life now for decades, stand a very few gigantic financial institutions that exert nearly unlimited power over how much consumers and businesses pay for the use of a small piece of plastic. American consumers and small businesses alike are spitting fire these days about the cost of credit cards, while the companies profiting from them are making money hand over fist."
"We should dispense with the notion that the credit card business in the United States is a free market with robust competition. Instead, we have an oligopoly of dominant banks that issue them: JPMorgan Chase, Bank of America, American Express, Citigroup and Capital One, which together account for about 70% of all transactions. And we have a duopoly of networks: Visa and Mastercard, who process more than 80% of those transactions."
"Possibly the most telling statistic tracks the difference between borrowing benchmarks, such as the prime rate, and what you pay on your credit card. That markup has been rising steadily over the last 10 years and now stands at 16.4%. A Federal Reserve study found the problem in every card category, from your super-duper-triple-platinum card to subprime cardholders. Make no mistake, your bank is cranking up credit card rates faster than any overall increase."
A few giant banks issue most credit cards while Visa and Mastercard process the bulk of transactions, creating limited competition. That market concentration results in higher prices for consumers and businesses that accept cards. The markup between borrowing benchmarks and credit-card rates has increased steadily over the past decade to about 16.4%. A Federal Reserve study found elevated rates across all card categories, from premium cards to subprime accounts. Banks have been raising credit-card rates faster than overall increases. Small businesses face particularly high costs because they frequently rely on credit-card financing.
Read at www.mercurynews.com
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