Consumers May Save As A Result of Debit Card Reform

After all the Durbin-related doom and gloom consumers have been hearing about in recent weeks – namely the new fees on checking accounts and debit card use that are being introduced by many retail banks throughout the country – there may finally be a ray of sunshine in the form of savings.

"Retailers across the nation are developing a wide range of innovative ways to pass these savings along to their customers with lower prices and better value," claimed Mallory Duncan, National Retail Federation senior vice president and general counsel said according to cspnet.

Prior to October 1 when Durbin went into effect, banks were able to charge retailers 1% to 2% of each transaction made by debit card, which averaged out to around 44 cents a swipe. Under the new law, debit card swipe fees have been capped at 21 cents, plus .05% of the total price and, in most cases, an extra penny for fraud prevention. Analysts have made estimates that merchants will wind up saving some $7 billion dollars annually as a result of the fee caps.

Many retailers are contemplating how to pass some of that savings along to their customers, and some are entertaining the possibility of offering discounts for debit card use, free or reduced fee deliver services overall lower prices and among other things.

"Change won't come overnight, but consumers will definitely benefit. Reducing these fees will put billions of dollars back into the Main Street economy, helping American families stretch their paychecks and ultimately preserving and creating local jobs to keep America on the road to recovery," said Duncan, reported cspnet.

However, that $7 billion also represents a substantial loss of revenue for banks. As a result, in the effort to recoup some of their losses several banks have announced that they will be increasing their fees for certain accounts and products, including a monthly fee for any debit cards transactions beyond ATM use.

"Every time Congress takes a step to protect consumers, the banks use it as an excuse to raise fees," Duncan said to cspnet. "We've seen it when Congress limited late fees and overdraft fees and now we're seeing it with swipe fees. Just as merchants and consumers are about to get some relief, they're doing it again. That doesn't mean Congress shouldn't pass consumer protection laws. It speaks more to the nature of the card industry than to whether swipe fee reform should have been passed."

Bryant Park

Bryant Park is a financial consultant for one of the companies listed on Wall Street. He writes on a variety of topics ranging from credit cards to different loans that can be availed by consumers. He holds a bachelor degree in Financial Services from Dartmouth College.