June 22, 2010
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News: Debit Card Swipe Fee Amendment Passed
The House and Senate reached an agreement on Monday to include provisions in the new financial reform bill that would limit debit card transaction fees. Although credit card transaction fees were not included in the amendment, the reduction of debit card fees is expected to save retailers millions of dollars. Retailers, especially gas and convenience store chains have participated in aggressive campaigns to reduce the debit and credit card transaction fees saying they are the second highest line cost. Merchants pay on the average of one percent to three percent of each debit or credit card sale. Furthermore, merchants say that in order to remain in business, the fee is eventually passed on to the all customers whether paying cash, debit, or credit. Now that the fee is expected to be reduced, consumers will be keeping a close eye on merchants to see if the reduction will be reflected in pricing.
On the other side of the fence, banks and credit card companies continuously maintained that if any reduction of interchange fees occurred, they would be forced to implement new fees or raise the cost of other banking services. The most outspoken in opposition of the swipe fee debate were small local banks and credit unions say the amendment will make it more difficult for them to compete against the larger banks. However, terms of the amendment would most like exempt most of them from the rule. The major credit card networks, MasterCard and Visa, were also in opposition of the amendment saying they were concerned that it could end of harming consumers as merchants pass on card payment acceptance fees to the end consumer.
As merchants move forward with one victory, there remains yet another to be fought. The amendment only pertains to debit card fees while credit card payment processing fees continue to haunt merchants. Overall, U.S. merchants pay an estimated $48 billion to banks and card networks each year and that number continues to rise. The new rule continues to be challenged as the banking industry argues that history has proven that under the same circumstances in other countries, merchants ended up fattening their own pockets with the cost savings and consumers did not inherit any savings.