On Friday morning, when the Congress arrived at a decision over the swipe fees being charged on debit cards, there was a shout of joy from the innumerable merchants and retailers who were stretching themselves thin to pay these fees to the banks and other credit card lenders.
The conference committee from the House and the Senate, on the morning on 25th July, met to take a vote on a various financial services. The vote that stood at 27-16 proved to be in favor of the recommended changes. This bill on financial reforms has the highly debated Durbin amendment which proposed for the reduction in the interchange fees, which are nothing but swipe fees being paid by the retailers to credit card lenders when any person paid for their purchase using credit or debit cards.
People who voted in the favor of the Durbin amendment (named after Richard Durbin who proposed it) felt that this would give the retailers an option to manage their costs better, especially when dealing with banks and credit card lenders. These financial institutions charge swipe fees to the merchants which are often in the range of 1% to 2% of the total transaction cost. The pet peeve of retailers all this while was that in most cases these fees were more than the processing charges for debit cards.
According to the Durbin amendment, the transaction fees should be in proportion to the total cost of purchase and it must be charged only for cards issued by banks that have lesser than $10 billion worth assets. Another feature of this amendment is that it gives the retailers, the right to offer discounts to customers if they opt to pay by debit card, checks or cash. There is also a $10 limit that the merchants can set to accept credit card payments without interchange fees. This amendment will prove to be a blessing to small companies who are trying hard to curtail ever increasing costs. Not only can they save on the interchange fees, they can even translate these savings as discounts to their consumers.
While this legislation has a positive impact on the retailers, the banks and other credit card lenders are not happy with this move. The potential loss that these financial institutions will have to be prepared for is to the tune of $5 billion.