The information provided on this website does not, and is not intended to, act as legal, financial or credit advice; instead, it is for general informational purposes only. Information on this website may not be current. This website may contain links to other third-party websites. Such links are only for the convenience of the reader, user or browser; we do not recommend or endorse the contents of any third-party sites. Readers of this website should contact their attorney, accountant or credit counselor to obtain advice with respect to their particular situation. No reader, user, or browser of this site should act or not act on the basis of information on this site. Always seek personal legal, financial or credit advice for your relevant jurisdiction. Only your individual attorney or advisor can provide assurances that the information contained herein – and your interpretation of it – is applicable or appropriate to your particular situation. Use of, and access to, this website or any of the links or resources contained within the site do not create an attorney-client or fiduciary relationship between the reader, user, or browser and website owner, authors, contributors, contributing firms, or their respective employers.
Credit.com receives compensation for the financial products and services advertised on this site if our users apply for and sign up for any of them. Compensation is not a factor in the substantive evaluation of any product.
“I’m hearing the same things that everybody else is hearing” including a possible transaction cap, says Peter Garuccio, a spokesman for the American Bankers Association. “The bottom line is this forces a minimum 70% reduction in revenue. Some of our members don’t believe they’ll be able to manage that.”
Such a cap could change how millions of Americans shop. Since the average family spends $122 a week on food, according to the U.S. Department of Labor, a trip to the grocery store could put many consumers over the limit and they’d have to find another way to pay.
[Related Article: House Debit Card Interchange Hearing Favors Delay]
“What’s the alternative? Start writing checks again? Going to the ATM to get cash?” says Gerri Detweiler, Credit.com’s credit and debt expert. “It’s not practical to say people are going to start using their credit cards because a lot of people don’t have credit cards, or they are close to their limits.”
Bank insiders confirmed that these institutions are considering such a cap, but they declined to speak on the record. The Durbin Amendment, which Congress passed last year, required the Federal Reserve to create new rules limiting debit swipe fees, known in the industry as “interchange” fees, which retailers complain have risen steeply in recent years.
Some speculate that the threat to cap debit card use could be a strategic one.
“I wonder if this is just another effort on the part of banks and issuers to scare legislators off the Durbin amendment,” said Detweiler. “I do absolutely believe there will be consumer consequences. But the idea that they would cap the amount consumers could spend on their debit cards seems like a least likely scenario to me. More likely in my opinion would be annual or transaction fees for debit cards, or fewer free checking accounts.”
The Fed’s proposal would cap most swipe fees at 12 cents per transaction. That’s an 80% reduction from the current average fee of 63 cents, according to the Fed. Banks collect about $15 billion annually from the current fees.
[Featured products: Monitor your credit reports and scores]
Bank representatives accuse the Fed of price-fixing, with big potential downsides for consumers.
“The government-mandated price control elements in the Federal Reserve’s proposed rule will severely affect consumers everywhere, causing new consumer fees, including checking account fees, and pushing low-income customers out of the banking system,” David Kemper, CEO of Commerce Bank, told the House Subcommittee on Financial Institutions and Consumer Credit on Friday.
Retailers support the Fed’s proposal, saying it would save consumers and retailers $1 billion every month. The National Retail Federation accuses banks of trying to stall necessary reform.
“Congress recognized last year that the credit card companies and big banks have been extracting monopoly-like fees from merchants and their customers for far too long,” Mallory Dunca, general counsel for the federation, said in a press release.
The Fed is scheduled to release the final rules in April.
Image: RogueSun Media, via Flickr.com
April 11, 2023
Uncategorized
September 13, 2021
Uncategorized
August 4, 2021
Uncategorized