For a number of years, every retailer on the street ranging from the coffee shop owner to the large superstore owner had the same pet peeve. They were not happy with the high interchangeable fees being charged by banks on purchases made by the customers using their credit and debit cards.
Finally, the Congress has heard the lament loud and clear and is gearing to bring about some financial reforms that can help retailers breathe a sigh of relief. There is a proposal being debated in the Senate, which if would come into effect, will be able to either lower the interchangeable fees or eliminate them completely. This has not gone down really well with the banks that have been making a large revenue through these fees. If this amendment comes into play, then, the banks will have to cut corners to accommodate their operating costs when they lose out on a part of the revenue through these fees.
The owner of Chappy`s restaurant located on Church street, John Chapman, said that the interchangeable fees are really expensive and they cost quite a lot of money to the retailers. He said that they faced the biggest challenge when the economy was really slow during the recent recession, but the banks still did not consider dropping these fees even marginally. Though the amount of money he made through his sales dropped significantly, AmEx was still charging him high rates for swiping credit cards for his clients.
He says that he pays an interchangeable fee rate of 1.75% on his Visa and Mastercard, but the rate he pays for using other cards can be as high as 5%. This means, if a restaurant makes business of about $1 million, it has to pay a fee of close to $17000 to the banks.
The financial sector has been eagerly anticipating these changes that are being discussed in the Senate. They are unsure about the outcome and are not sure if it will successfully pass through the Senate.
The topic of discussion in the next two weeks is the changes to be done on the debit card fee. The Congress, in the meanwhile, is trying to eliminate the differences between the Senate and House versions of the legislation to bring about financial reforms.
In a move by the credit card lender, the Credit Union National Association, last week published an ad that ran the entire length of the page to inform the consumers that is the interchangeable fee reform came into effect it would impact them adversely.