Bank Fees And You Informative - Debit Card Fee Decrease May Mean Increases Elsewhere

Review by T on 2010-12-16
ANYTOWN -- Today the Federal Reserve Board recommended that the fees bank charge for a debit card transaction (swipe fee) be limited to $0.12 per transaction.

Currently, the fee averages 1%, with some banks charging as much as 2%. On a $200 transaction, 2% is $4. Needless to say, this change will cost the banks a lot of money - it is estimated to be billions each year.

So, while complaints of new bank fees are already escalating following the mandated reduction in overdraft fees, get ready for the possibility that maintenance fees and minimum balances will more likely be coming to your banking institution.

The stock of Mastercard and Visa plummeted today about 10% on this news, as these institutions are heavily dependent on such revenue.
Comments:9 Replies - Latest reply on 2010-12-16
Posted by T on 2010-12-16:
This is in a review period. It would mean lost revenue also to the larger banks, like Chase and BoA, that issue debit cards. It should translate to lower costs for the merchant (and thus your cost for goods) but the Fed did not comment on that.
Posted by Anonymous on 2010-12-16:
I see where that will hit Visa/MC and perhaps merchant banks but do you know of the impact to consumer banks? Could it be possible that it might actually benifit them?

Excellent informative post!
Posted by Kenneth on 2010-12-16:
This is a source of income to the banks. When they take it away, you will see another round of fee increases. But Walmart will be happy, so it's all good.
Posted by Anonymous on 2010-12-16:
I've yet to see any round of fee increases but then I bank at an old fashion community bank. The underlying myth that a bank can't make money by honest banking is simply not true. Holy smokes it’s fractional reserve banking. You gotta be a reckless gambling fool not to be able to turn a profit.
Posted by Anonymous on 2010-12-16:
It will create competition and force consumer banks to lower their fees for some services, while increasing fees for others to make up for lost revenue.
Posted by saj80 on 2010-12-16:
Unfortunately, as with airlines, many banks have turned to fee income for profits, and this will impact that. However, to assume merchants will lower prices accordingly is ridiculous; most merchants, including WalMart, will now use this gain for their profits. Many types of account structures will change at all banking institutions, including community banks and credit unions, although probably not as severely as the larger banks are doing, as the "smaller" banks don't generate a large volume of income from these fees. Free checking will, at least short-term, disappear, until banks can come up with a new product to replace it that won't be an expense to their operation. It is very important to remember that the majority of community banks and credit unions played no part in the recent financial crisis, yet they are now being forced to abide by new regulations forced upon them by the government. In my opinion, I will continue to support my local community bank.
Posted by Venice09 on 2010-12-16:
I just swipe my card as credit and never pay a fee.
Posted by T on 2010-12-16:
Venice -> The fee the post refers to is the "bank interchange fee," which the *merchant* is charged behind the scenes. It ends up affecting bank customers because the bank gets less revenue for servicing the transactions.

When you use a debit card as credit, I don't know of it is considered credit or debit as far as the fee charged. One way or the other, the bank collects a "toll" for that swipe. M Card gets up to 2.5% or 3% I think, for credit transactions. Insane.

You may have been replying to another comment - I assumed you directed it at the post.
Posted by Venice09 on 2010-12-16:
Oops, I didn't read this very carefully. When I swipe as credit, I don't know who pays or collects a fee. I remember years ago Walmart stopped accepting bank cards as credit because of the fee. They were forced to switch back because customers were outraged.

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