Fed proposed to police lending by slashing debit... - Other News

ADVERTISING DISCLOSURE

ADVERTISING DISCLOSURE:
Credit-Land.com is an independent, advertising-supported web site. Credit-Land.com receives compensation from most credit card issuers whose offers appear on our site. Compensation from our advertising partners impacts how and where their products appear on our site, including, for example, the order in which they may appear within review lists. Credit-Land.com has not reviewed all available credit card offers in the marketplace.

Credit Card Applications » News » Other » Fed proposed to police lending by slashing debit interchange fees to 12 cents.

Fed proposed to police lending by slashing debit interchange fees to 12 cents.

Fed proposed to police lending by slashing debit interchange fees to 12 cents.

Who deserves to get ripped off the most? And where exactly does the money go to? Is the government price fixing?

Under the Dodd-Frank bill, the Fed proposed to police lending by slashing debit interchange fees to 12 cents for any banks greater than $10 billion in size. This is a 70% less than the existing average. Fees that seem to be growing higher by the minute will finally be controlled.

Many people have different perspectives on the topic of credit card legislation. Here are a few to examine:

Customers, help yourself before you save Wal-Mart!

If the past is any indicator of how these provisions work, you’ll probably want to think more than two seconds before you swipe your card at the pump.

  • The plastic execs are likely to raise fees or devise other creative tricks to make up for their lost income.
  • If competition forces Wal-Mart (who pays credit card fees) and other retailers to share its wealth by offering customers significant discounts via cash, check or debit cards, you will gain very little. Even though retailers truly do have their customers’ interests at heart, they wouldn’t spend all this effort sending proposals to Congress and suing Visa and MasterCard, if they were willing to give it all away.

Retailers frustrated by uncontrollable fees, desperately need governments help

As gas and food prices increase and 80% of buyers use credit (that is 10,000 transactions per second). Interchange fees are the fastest growing expense even over labor and health costs. Instead of charging you a transaction cost, retailers pay between 1.5-3% every time you sign a charge slip. Some low margin businesses are forking out more in fees than they earn in operating margins, causing them to make difficult business decisions. Following the European Union, Canada, and Australia’s lead, retailers argue that government intervention is necessary to protect them from the colossal monopoly credit card companies enjoy (They control 71% of the debit market) .

Large banks face the realization that their enviable monopoly might be taken away

“The statute makes no more sense than regulating the price of a Burger King hamburger solely to the costs of the meat and the bun,” according to TCF Bank CEO William A. Cooper. The proposed fee caps will squeeze banks profits significantly because 8.5% of their revenue comes from debit card fees. Even the stock market is worried. When the proposal was announced, shares of financial firms fell sharply.

Bankers claim that cardholders and merchants will soon realize that they won’t know a good thing until it’s gone. The 12 cents loss is not sufficient enough to cover all the benefits they are used to receiving (such as fraud protection).

Small banks may have been able to boast that they were fine in the financial crisis, but might be in the most trouble and potentially the next to collapse

Smaller banks keep reminding us how well they held up well when times were tough. Less than 4% of community banks failed and this was at a time when larger banks were collapsing by the minute. In today’s economic times, they might have the most to lose. Since Dodd Frank only applies to card issuers with $10 billion or more in capital , merchants might ditch the smaller guys and go where the fees are lower. If smaller banks don’t lower their fees, they might be the next to suffer.

I am curious to see how the debate continues, and who gets mad at whom next. I wonder if the bill will really get passed. Only time will tell.

Disclaimer: This editorial content is not provided or commissioned by the credit card issuer(s). Opinions expressed here are the author's alone, not those of the credit card issuer(s), and have not been reviewed, approved or otherwise endorsed by the credit card issuer(s). Reasonable efforts are made to present accurate information, however all information is presented without warranty. Consult a card's issuing bank for the terms & conditions.
All rates and fees, and other terms and conditions of the products mentioned in this article/post are actual as of the last update date but are subject to change. See the current products' Terms & Conditions on the issuing banks' websites.
Add to Favorites:

Related News:

Chases New Ink Business Unlimited Card

Posted: May 24, 2018

With some help from Pro Skateboarder Tony Hawk, Chase is rolling out the new Ink Business Unlimited card, offering cardholders 1.5% cash back on all purchases with no categories to deal with. On top of earning cash back, they also get a ... Continue reading
New IKEA Credit Card

Posted: May 23, 2018

The IKEA Visa credit card is now available, offering 5% back in rewards on IKEA purchases. People with this card also earn 3% back when shopping for groceries, eating out and paying for utilities. All other purchases get 1% back. Continue reading
Credit Card Hack at Chili’s

Posted: May 22, 2018

If you stopped by Chili's to grab some ribs or a fajita between March and April 2018, you might want to keep tabs on your credit card statement. Anyone who paid cash is safe, but those who used credit or debit cards may have had their data ... Continue reading
Get the latest news, articles and expert advice delivered to your inbox. It's FREE.
Earn 5% cash back at different places each quarter like gas stations, grocery stores, restaurants, Amazon.com, or wholesale clubs up to the quarterly maximum each time you activate.
For Excellent, Good Credit
We'll match all the Miles you've earned at the end of your first year. For example, if you earn 30,000 Miles, you get 60,000 Miles.
For Excellent, Good Credit
0% Intro APR on Balance Transfers and Purchases for 18 months. After that, the variable APR will be 15.49% - 25.49% based on your creditworthiness*
For Excellent, Good Credit
You've successfully subscribed!

Please specify the following:All these fields are optional

Your Credit History
Themes you are interested in:

By providing this information you help us make our news letters more useful and informative. Thank you!