Consumer Payment Card News

Dodd-Frank Act's Swipe Fees

With all this controversy swirling about regarding the “swipe fees” for payment cards, one thing’s for sure; the trickle-down will get your feet wet. The Dodd-Frank Act’s Durbin Amendment, calling for the Federal Reserve to cap the interchange or “swipe” fees that financial institutions charge merchants for card approvals, initially appear to boost merchant revenues. The legislation would require banks to charge no more than 7-12 cents per debit transaction, rather than the legacy 1%. On the flip-side, financial institutions are pushing to repeal the law, given this cuts their funds for the costs of the complex networks and fraud-prevention measures that support the debit- and credit-card systems. Subsequently, there’s talk of higher checking-account fees and less lending if the fee caps are implemented. This is because it costs the average bank $230 per year to maintain a consumer checking account, including debit-card usage and overhead costs, $35 of which is profit; Profit that would fall to roughly negative $27. Be-it the merchant, be-it the card issuers; as a consumer you will feel effects of the Interchange Amendment if goes into effect this Summer.

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