What Do Your Credit Card Charges Support?

Cash or credit? In 2012, purchase volume in the United States from credit card companies Visa, MasterCard, American Express, and Discover totaled close to $2.1 trillion. Of these $2.1 trillion worth of transactions, cardholders’ issuing banks collect 1-3% in the form of an interchange fee. While 1-3% of the cost of a sandwich at Subway for lunch may seem negligible to you, consider all of the other people in the same restaurant using their credit cards, multiplied by the number of locations across the country, multiplied by the number of lunches each person purchases each year, and so on. If we crunch the numbers, we can deduce that credit-issuing megabanks collect between $20.5 billion and $61.4 billion each year on credit card transactions.

The majority of that money goes to the 10 largest credit card issuing banks in the U.S. It’s difficult to believe that just a few institutions get to divvy up such large sums of money amongst themselves, especially when the individual charges to an everyday person’s credit card go largely unnoticed. As you might guess, those billions of dollars pay for high salaries and bonuses, and finance lending to fossil fuel polluters and other destructive industries around the globe.

Let’s think for a minute about just how much money large banks amass from the collective totals of millions of miniscule charges, and how that money could be used to fund projects that could add real benefit to our society – the kinds of projects that community development banks and credit unions finance every day. Consider one of our largest expenditures as a nation – energy. According to EnergyStar.gov, the average cost of retrofitting a residential home in New York State with efficiency upgrades to generate proven energy savings falls between $5,600 and $8,500. Assuming the credit card industry has a bad year and only generates $20.5 billion on interchange fees, and that 100% of the retrofits will cost $8,500, the money scooped up by megabanks could instead fund roughly 2,470,600 energy efficiency installation projects in New York homes.

Alternatively, the price of installing a new wind turbine in the US is roughly $4 million on the high end. A new wind turbine generally provides 2 megawatts of power-generating capability. Once again let us assume that interchange fee revenue is at the low end of $21 billion. At that amount, about 5,250 new turbines, or 10,500 megawatts of electric capacity could be financed, instead of covering credit card promotion, executive compensation costs, and other dubious expenditures. If credit-lending megabanks had a good year and collected $61 billion, that’s about 15,250 new turbines, or 30,500 megawatts (30.5 gigawatts) worth of clean, renewable electric potential shifted primarily into the pockets of bank executives, and away from the collective benefit of our environment and our economy. To further illustrate, the United States’ current wind capacity is about 60,000 megawatts, or 60 gigawatts. In one good year for the credit-issuing industry, revenue from interchange fees alone could increase the current national wind power capacity by 50%, yet we continue to pay high near-and-long-term costs for dirty, non-renewable sources of electricity.

The choice is ours to make.  We can continue to support megabanks.  Or, we can sign up for credit cards issued by community investment banks and credit unions that support programs like clean energy development, organic farming, and low-income housing. Instead of supporting the 1%, you can direct your interchange fees straight back into your community! Join our Take Charge of your Credit Card campaign and say goodbye to megabanks. Apply for a responsible credit card today, and take our pledge to let us know that you are breaking up with your megabank.

This post was researched and written by Sam Catherman, Green America’s Responsible Banking Intern.

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