The Debit Card Fee Battle

Almost everyone who uses a debit card is somehow impacted by high fees. Businesses are charged fees for offering the service and they pass those fees on to consumers. Recent legislation in the USA seeks to limit the amount that card companies can charge merchants which is a win for the businesses but a loss in profit potential for the card companies.

Debit Card have rapidly become a major form of payment all over the world. These cards offer the same convenience as credit cards but with none of the interest fees. That is great news for consumers, but small business owners have often felt abused by the excessive charges they are forced to pay to accept these cards. Small businesses are especially affected by added fees because they are often unable to pass those costs on to their customers so they lose part of their profits.

The swipe fee battle

Swipe fees are usually bundled into the cost of buying products or services. But, when the fees became so excessive that they were significantly higher than the actual processing costs business owners began to complain. They could not reasonably pass on the total cost nor could they stop accepting debit cards without risk of losing business. In fact, the National Association of Convenience Stores lists swipe fees as their second biggest expense. The only thing that cost them more was salaries. With numbers like that it is easy to see why many business owners hoped for a way out of these costs.

The Durbin Amendment, called such because it was introduced by United States Senate Majority Leader Dick Durbin called to limit these charges. He calls the current rate of swipe fees outrageous and aims to stop Visa and MasterCard from using what he called anti competitive practises.

If they were stopped, he said small businesses would be able to use a common sense system that offered customers discounts. This he said allows customers to keep more of their money and small businesses to stop being abused by the credit card company giants. All round many could save money.

Revenue for card lenders

As you would expect, swipe fees are a major revenue stream for the credit card companies and they are not willing to simply let them go without a fight. They see this as a major loss in their battle to protect profits but plan to continue fighting. The concern is that by limiting interchange fees on debit cards the door could be opened to limit those charged on credit cards too. If that were to happen credit card companies would surely look for other ways to profit. While almost everyone would like for credit cards to be fee free, the card companies are in business to make money and somehow they will do just that.

Alban is a personal finance writer. He offers tips on how to find the best home loans online

Leave a Reply

Your email address will not be published. Required fields are marked *