Debit Card Processing Fees About to Run Their Last Charge?
Show of hands, how many people reading this regularly use an ATM card to pay for their purchases? (You don’t really need to raise your hand – I can’t see you.) Now, how many of you have swiped your card only to be greeted with a fee of $2 or $3, just for paying with a card? I’m guessing if you just threw your monitor across the room in a fit of rage, you know what I’m talking about.
Well here’s some good news for everyone who not only likes to spend money, but for the retailers who take that money as well. This week, Congress is putting the finishing touches on its long overdue financial-overhaul legislation and one final addition that has everyone up in arms is the inclusion of debit card fee cuts retailers and consumers alike have sought after.
The inclusion of the fee cuts, which would seriously slash the “swipe fees” card companies charge merchants every time someone swipes a debit card, is a real victory for retailers and consumers who “enjoyed” having the fees passed on to them, and a serious blow to the financial industry, who will no doubt miss the estimated $20 billion the fees bring in each year.
While it’s not clear exactly how much of that fee will be reduced by, or how much of an impact it’ll have on consumers like you and me (so don’t run out with your charge card just yet), some experts believe it could save some retailers hundreds of millions of dollars if they’re simply cut in half. Debit card fees are nothing new, nor are they exclusive to us. However, while charge card fees do appear abroad in Mexico, France, and Germany, they’re unregulated in the US, and so are twice as high as the rest of Europe (USA! USA!).
The lobbying battle that has erupted from this reads like the greatest Pay-Per-View match you’d ever see, with bank juggernauts like JP Morgan Chase in one corner, and retail powerhouses like Lowe’s and Target in the other. Many banks are saying that if the swipe fee is slashed, they’ll just have to look for revenue elsewhere, by raising fees and eliminating debit card rewards.
The legislation, if it passes, would only apply to debit cards and not traditional credit cards, which means it would only cover less than half of the annual interchange fees we pay every year. Still, many retailers say those should be shared with consumers as well. Home Depot in particular stated, "Any relief as it pertains to these fees will give the Home Depot the ability to reduce our cost of doing business…Such benefits are likely to include lower prices and investment in the business to better serve customers." So if nothing else, I now have an excuse to completely renovate my house.
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