There must be two sides to every story, right?

Well, in the case of the credit and debit card interchange issue, there are at least  three sides.

1. There's the side of the credit card companies—Visa and MasterCard-  

    2. There's the retailers' side—places like Macy's, WalMart, or your  neighborhood pizza parlor.

    3. And there's your side—the consumer who ultimately pays the freight in terms of annual fees, interest rates, and the prices for goods and services from the retailer.

First, in case you don't know, interchange is the fee a merchant pays to whichever financial institution issues the debit or credit card. It gives the creditunion the income we need to run these programs. The fees from interchangecover the risks associated with credit cards, risks such as fraud and data security.

We don't set the interchange rate. If the rate is set too low, our credit union will either be forced to discontinue our card programs or, worse, have to chargefees to cover the costs of running these card programs.

On an individual transaction basis, the interchange amount is  minimal, less than2% of the purchase price. But that revenue pie has grown large:

     * Ninety-two percent of households with annual incomes of $30,000 ormore have at least one credit card.

      * The average number of cards for all households is 6.3.

      * Eighty percent of consumers own a debit card.

       * More consumers now have debit cards than credit cards—and they use them more than cash, credit cards, or checks individually.

In fact, debit and credit cards represent more than 40% of all noncash transaction volume, the Federal Reserve says. It's safe to say interchange incomeannually is in excess of $30 billion. In 2009 the average interchange rate was1.82% per transaction, according to the  Nilsom Report, on credit and debit cards.

Not surprisingly, now that the system is profitable, fraud is down, and profits are up, retailers either want a piece of the revenue pie or they want that charge reduced. In the past few years, retailers and their trade groups have filed more than 50 lawsuits against credit card  associations and card-issuing banks.Remember, retailers assume none of the card risk and they get paid right away.

Should they get a slice of the pie? The Credit Card Responsibility and Disclosure Act instructed the Government Accountability Office (GAO) to study the issue and issue its findings. The result: In December of 2009 the GAO said different strategies for reducing the cost of card interchange to merchants would be ideal.

In short, everyone would lose, especially the consumer.

Here's what the GAO said: "… merchants would benefit from lower interchange fees …consumers would also benefit if merchants reduced prices for goods and services …" But, "consumers might face higher card use costs if issuers raisedother fees or interest rates to compensate for lost interchange fee income …."

The reality is everyone benefits from card payments:

     * For consumers, the benefits are convenience and better security over cash and checks.

      * For merchants, cards help boost sales, provide faster checkout times, provide convenience, and improve security.

      * For credit unions, they offer the ability to offer card programs on par with major financial institutions.

If credit unions could not afford to offer these programs, major banks would have few competitors to keep them, well, semicompetitive.

And then there's this reality. In Australia, where the government mandated that interchange be cut in half, cardholders saw their annual fees rise and benefits(such as frequent flyer programs) shrink. The lot of the merchant may have improved, but not that of the consumer.

Without interchange income, credit union issuers would not be able to offer their cards at lower rates than other providers. And nationally, credit union credit card rates are between one percentage point and one-and-one-half percentage points less than the average for banks, according to companies tracking these rates.

Interchange fees and who should get what share is a complex issue for all involved. At the core, it is your money that pays the tab. Fortunately, your member-owned  Progressions Credit Union is charged with looking out for your best interests; we do so in the form of lower fees.