1. As of January 2011, nonmortgage consumer debt had increased for the fourth straight month. At the same time, credit card debt fell to a sixyear low point. Excluding mortgages, how can it be that consumer debt is rising while credit card debt is falling?
2. When consumers swipe a card, either debit or credit, to make a transaction with a merchant, the merchant pays an interchange fee to the cardissuing bank. Generally, the interchange fee for a debit card is 1% of the purchase amount, while for a credit card it is 1.6% of the purchase amount. In 2009, the average interchange fee was 44 cents. In December 2010, the Federal Reserve proposed capping that interchange fee to 12 cents per transaction. Who are the three primary stakeholders in this proposal, and what do you predict their positions will be relative to this proposal?
(12 points: 1 point each for listing the primary stakeholders, 3 points for each stakeholder’s position)
3. How would consumers who traditionally pay using cash potentially benefit from an interchange fee cap?