Brand new Federal suggestion takes aim at extreme debit card swipe costs

Limiting debit card swipe costs to 12 cents a purchase was recommended by the Federal Reserve in a proposal December 16. the financial reform bill demands the Fed to rule in debit card swipe costs along with other financial institution practices that put the squeeze on retailers that accept debit cards. Not surprisingly, merchants support the measure and major credit card corporations opposed it as they viewed their stock take a struck on the media.

The Fed Swipe limit proposal facts

Under the current system of debit card swipe fees, credit card companies charge retailers 1 to 2 % of the transaction, regardless of the dollar value. At least two debit card networks would be presented to merchants to choose from with the Fed debit card swipe proposal. Visa and Mastercard would face a lot more competition this way. The reason why the Fed came up with the swipe limit proposal was because of the financial reform bill. It required that banks have to make debit card swipe fees "reasonable and proportional" to what the bank pays to process the electronic fees. Banks could be forced to be cost efficient with the debit card swipe fee limits, as outlined by the Fed.

Easy money for banks lost quickly

About $15 was made in swipe fees by credit card companies. This was in 2009 alone. The Fed swipe fee limit proposal would be a boon for retailers. Any banks using Visa or Mastercard may lose up to 80 to 90 percent in revenue. A JP Morgan Chase analyst told this to Bloomberg. Average debit card swipe fees would go down about 75 percent with the 12 cent swipe fee cap, says UBS Investment Research. The Fed said the brand new debit card swipe fee limits probably won’t translate into lower prices for consumers. Customers don't have to be on debit card reward programs like banks think. You will find different solutions to get consumers interested inside your product.

Fed swipe fee limits get reaction from numerous

The National Retail Federation said lower costs for merchants may lead to discounts for consumers. The American Bankers Association said the Fed would allow retailers to keep away from paying their fare share for the benefits they get from the card payment network. Shortly after the Fed presented the swipe fee proposal Thursday, Visa stock fell 11 % and Mastercard stock fell 9 %.

Information from

Washington Post

washingtonpost.com/wp-dyn/content/article/2010/12/16/AR2010121604553.html

Bloomberg

bloomberg.com/news/2010-12-16/federal-reserve-moves-to-reduce-debit-card-fees-visa-mastercard-decline.html

Wall Street Journal

online.wsj.com/article/BT-CO-20101216-713515.html