The populist bandwagon to whack the credit card companies for a financial crisis they didn’t cause is still going on. The latest is proposed legislation —really a revival of stuff that’s been floating around—to help the merchants reduce the fees they pay to the card companies. You don’t need an advanced degree in economics—just a little bit of common sense to figure out who is going to end up paying a lot more for plastic—the consumer.

The banks aren’t making any sort of extraordinary profit on cards so they have to make up anything that depresses their revenue from higher fees somewhere else. What they lose from the merchants they will make up for by raising rates—annual fees and other charges—to consumers. Consumers that pay their bills on time will take a double whammy because they are already going to be hit by higher fees from the most recent “consumer protection” legislation. There’s no guessing about this—we’ve already seen this movie in Australia and Spain where a decline in interchange fees resulted in higher costs for consumers. Advocates of lower interchange fees claim that merchants will pass on the savings to consumers—some might do that but the big ones who have been advocating this will probably add it to their bottom line (which of course is why they are spending money lobbying on this).

There is no shortage of bad business practices in financial services that helped get us into the current mess and helped make it worse. Interchange fees wasn’t one of them nor for that matter were late fees and other charges that penalized consumers for being careless with debt. The short-sighted legislation coming out of Congress is going to tax a lot of American consumers.