Earlier in June, the United States Senate has approved a bill that would set price caps on merchant fees. It was sponsored by Senator Richard J. Durbin of Illinois to respond to the merchants' complaints of being forced to pay high merchant fees.
These merchant fees or "swipe fees" are charged to merchants every time a credit card is swiped during sale transactions. Normally, merchants are charged 2.5 per cent of the sales per transaction, but some claims to have paid more than the usual. For instance, a customer buys a $100 item and uses his credit card for payment. The merchant is charged $2.5 or higher to cover the fee. If totaled annually, merchant stores will be reporting thousands of dollars for merchant fees, thus reducing profits.
The bill was strongly opposed by banks and credit card companies. With the credit card act which put limits to how they should charge customers with fees and interests, banks and credit card companies have been relying on the swipe fees to recover what they should have earned this year if the reform wasn't approved.
Merchants said that swipe fees hurt cardholders since the fees are considered when they price their products. If the swipe fees are lowered, they won't have to increase their prices and customers can afford to pay with cash if the price is right.
Lately this month, the members of House and Senate agreed to reduce interchange fees or merchant fees in the final version of the financial regulations bill. Retailers would now be earning more since their costs are lowered. However, the bill only applies to debit cards and the merchant costs are affected by only less than a half.
Another House - Senate conference discussed whether to put limits on swipe fees for prepaid cards or not. A proposal to regulate swipe fees for prepaid cards was opposed by the Center for Financial Services Innovation (CSFI) through a letter sent to the chairmen of the house and senate committees. The CFSI said that the proposal could harm prepaid card holders and that it will lessen the chances for households with low to average income to avail of financial services that aims to help poor and under banked households to be a part of the major financial system.
Just recently, Washington Post reported that the conference decided not to regulate these prepaid cards due to possible harmful effects. If swipe fees are reduced, the banks and credit companies will come up with higher fees to make what is lost.
As of now, merchant fees on prepaid cards and traditional credit cards remain unregulated and are still solely based on the sales value per transaction. Merchants are still forced to increase their prices making it obvious that the consumers are given the biggest burden to pay the costs.