Economies are complex systems, so actions that individuals, and especially governments, take often have unforeseen effects.  Here is Air America reporting on recent credit card reforms in Australia:

In 2003, after years of lobbying from merchants, the Australian central bank cut Visa and MasterCard’s interchange fees in half. Those lower fees cost the credit card giants about 1 billion Australian dollars.

But banks and credit card companies are famous for their ability to find new revenue streams, and soon they turned to consumers to make up the difference. Australian banks cut credit card perks and shrunk rewards programs, like frequent-flier miles. They ramped up interest charges and raised annual fees.

The new law passed Down Under also made it possible for merchants to impose surcharges on transactions made with a credit card and even though their interchange fees had been cut in half, many Australian companies began do to just that. In some cases, these new fees exceeded the old ones.

It would be great if the US Congress would study the Australian example as it considers passing additional reforms to supplement the CARD act from last spring.  I hope that we can at least avoid the brain dead economic free-lunchism  of an interest rate cap, which is unfortunately but unsurprisingly being pushed by my own state’s junior senator, Bernie Sanders, who has proudly been ignoring basic economics ever since the people of Burlington were foolish enough to elect him mayor in 1981.

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