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Credit card companies figure out how to spin straw into gold

Certainly this is a good first step. It would have been better if Justice had also insisted that merchants be given the option of adding surcharges for credit card purchases or the right to refuse to accept higher-fee cards altogether. Both are prohibited under credit card contracts.

In the end, there is only so much under existing antitrust law that the Justice Department can do. Given the hammerlock that Visa, Mastercard and American Express have on the market, the only sure way to prevent them from charging excessive fees and earning monopoly-like profits is through direct regulation. Congress recently mandated just that for debit-card fees, which the Federal Reserve now proposes to cut by more than 80 percent. It was only political push back from the banks and credit card companies that prevented similar regulation of credit cards.

There are two other reasons for the public to be concerned about the arms race in premium awards card.

The first is that the current kickback arrangement is highly regressive. A study by the Federal Reserve Bank of Boston found that households with annual incomes of less than $20,000 pay an extra $21 a year in higher retail prices as a result of merchants' credit card fees, while households with incomes of $150,000 benefit by $750. The reason is simple: Poorer people tend to do more of their business in cash and don't qualify for many high-reward cards.

The other is debt. One common rationale that the industry gives for high-reward cards is that they help to "lift" merchant sales by getting customers to spend more than they otherwise would. While that might be true for an individual merchant, it can't be true for all merchants unless it increases overall household income (unlikely) or induces consumers to save less and take on more debt. And, indeed, that's exactly what appears to have happened during the recent credit bubble - a bubble, we should remember, that led to a financial crisis, a prolonged recession and, ironically, tens of billions of dollars in bad debt write-offs by credit card issuers.

That hardly seems like the kind of social and economic benefit that the credit card industry wants to brag about.

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