August 03, 2010
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CA Battles Against Debit Card Fees, Pt.2
Fees to offset other fees.Not everyone shares Senator Oropeza's sentiments pertaining to debit and credit card fees, several merchants stand against the new legislation. These merchants, who include Atlantic Richfield Co. owner of BP Oil Company and a large group of small business owners, maintain that if Oropeza's legislation should pass, it would cause undue harm to merchants. Swipe fees that merchants pay the banks and major debit and credit card networks place a heavy burden on small businesses which are said to be the second largest cost line item on their sheets. These debit and credit card fees range between 1 and 2 percent of the total transaction amount plus a flat fee. Merchants charge extra fees to offset these interchange fees.
Merchants have been asking lawmakers to implement legislation that would cap debit and credit card transaction fees known as interchange fees. The recent approval of financial reform made provisions for the Federal Reserve to cap debit and credit card transaction fees, however, it is not known to what extent they will actually to that. Final rules will not be written and released until sometime next year. Unless the Fed place a reasonable cap on the fees, merchants continue to express concern that prices will continue to rise as interchange fees rise.
Fuel companies are suffering the greatest from high debit and credit card payment transaction fees. Gas station owners say that they are already working on a low margin and any increase will send fuel prices rising. Ultimately, the consumer will be the end loser. Merchants say that by having the ability to offer discounts to consumers for using a lesser expensive method of payment such as debit card rather than credit, will contribute immensely in helping to keep prices down. Going back to Visa's argument, the banks and card networks say that merchants can solve this problem by just simply choosing not to accept credit.
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