Stephanie Sack, who owns two boutiques, is tired of paying hundreds of dollars a month in “swipe fees” to big banks, especially because the fees — assessed each time one of her customers uses a debit card — keep going up.
Stories like Sack’s led last year to an effort spearheaded by U.S. Sen. Dick Durbin (D-Ill.) to limit the fees banks can impose when someone uses a debit card. Rules capping the fees are scheduled to go into effect on July 21, but now there are efforts in both the U.S. House and Senate to delay their implementation.
Congress should reject those efforts and let the new rules go into effect.
Each time someone uses a Visa or MasterCard debit card, the bank that issued the card charges a fee of 40 cents to 45 cents or more, though the Federal Reserve found the actual processing cost is only 4 cents. Because consumers typically use debit cards for smaller transactions while putting the big stuff on their credit cards, debit card swipe fees can take a significant bite out of a retailer’s profits.
Nationwide, businesses are paying $16 billion to $20 billion a year in debit card fees, a cost that partly gets passed on to all consumers, even those who use cash.
Banks call caps on swipe fees a form of unwise price controls and say the caps actually would harm consumers because banks would make up for the lost revenue by tightening credit and possibly ending customer reward programs and free checking accounts. They also argue that small banks could be forced out of the business.
But the law exempts smaller banks with assets of less than $10 billion. And why should poorer families who are more likely to pay cash subsidize reward programs for wealthier card users?
Swipe-fee reform is needed.
Chicago Sun-Times (April 14)