Credit and Debit Cards: Federal Entities Are Taking Actions to Limit Their Interchange Fees, but Additional Revenue Collection Cost Savings May Exist

GAO-08-558 Published: May 15, 2008. Publicly Released: May 15, 2008.
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Federal entities--agencies, corporations, and others--are growing users of credit and debit cards, as both "merchants" (receiving payments) and purchasers. Merchants accepting cards incur fees--called merchant discount fees--paid to banks to process the transactions. For Visa and MasterCard transactions, a large portion of these fees-- referred to as interchange--goes to the card-issuing banks. Some countries have acted to limit these fees. GAO was asked to examine (1) the benefits and costs associated with federal entities' acceptance of cards, (2) the effects of other countries' actions to limit interchange fees, and (3) the impact on federal entities of using cards to make purchases. Among other things, GAO analyzed fee data and information on the impact of accepting and using cards from the Department of the Treasury (Treasury) and the General Services Administration, reviewed literature, and interviewed officials of major card companies and three foreign governments.

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Recommendations for Executive Action

Agency Affected Recommendation Status
Department of the Treasury In order to help expeditiously achieve savings to the government, including those associated with accepting cards, the Secretary of the Treasury should take steps to establish a full implementation strategy for FMS's revenue collection review program. Such a strategy should include a timeline for completing the reviews, cost savings estimates associated with individual reviews, and an assessment of the adequacy of the resources committed to the program.
Closed – Implemented
In December 2008, Treasury's Financial Management Service (FMS) developed an implementation strategy for its new "holistic approach" revenue collection review program. The strategy includes the methodology for executing the program, timeline for completing reviews of all agencies included in the program, FMS resources commitments, and criteria for the selection of agencies and estimated cost savings.

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