New banking rules displace existing credit and debit card rewards programs

Customers generally love incentives and rewards programs such as air miles, cash, or other incentives. However, the merchants are the ones that are penalized due to the new rules.

Due to the revision in rules, there could be a shift in power to retailers from banks and that may bring about big changes in the whole shopping experience, as well as, rewards cards.

These battles over the credit cards and debit cards have a huge impact on the US Bank, Best Buy, and Target. The implications also seem to extend to small business operations like the 'R' Skyway Store, where it is only cash and checks. They don't accept credit cards or debit cards at this convenience store as they claim that the card swipes cost them too much. Nancy Leitch, as well as her husband Michael, don’t accept credit cards or debit cards as they will have to shell out huge fees on each swipe. They feel they will have to raise their prices by 5% if they have to offset the costs involved in swiping the plastic. This would inadvertently be passed on to their customers. Hence they have decided not to accept these cards. Although other merchants accept debit as well as credit cards, they are frustrated about having to pay fees to the banks each year, that run into tens of thousands of dollars.

President of Minnesota Retailers Association, Brian Steinhoff, states that these fees are onerous, but retailers have to accept them as they have no choice. He also states that this fee is transferred onto the customer like all the other charges and the customer pays for it.

However, the revisions in the future could change all of that. Now there is a suit that is still pending with the Justice Department with MasterCard and Visa. When the approval comes through, merchants will be able to offer discounts to customers who pay in cash or other cards that do not come with high fees.

There is also another proposal by the Federal Reserve to reduce fees to 12 cents, for a single transaction. Banks are however, unhappy with the cut in fees.

Doug Nicholas

Doug Nicholas, a financial consultant by profession with a Masters degree in International Business from Brown University, is also an ardent writer. Though he has a full time job at one of the companies listed on Wall Street, he does manage to squeeze in time to follow his passion. He puts his ideas to words in his articles related to finance and business.