Washington (AP) — Swipe your debit card at the supermarket and you’ve placed yourself at the heart of a contentious congressional debate.
On one side are banks like JPMorgan Chase and Bank of America and credit card networks like Visa and MasterCard. On the other are retailers, including giants like Wal-Mart and Target.
At issue: The “swipe” fees banks charge merchants for one of today’s most commonplace conveniences. At stake: up to $20 billion in potential bank losses and merchant gains.
For consumers, it could mean lower prices at the local store or restaurant, or it could result in higher bank charges, fewer “rewards” for credit card users or even the imposition of an annual debit card fee.
The fight over plastic has been raging for years - a federal appeals court once called it “a clash of commercial titans.” Now it’s landed in the middle of a massive financial regulatory bill primarily aimed at restraining Wall Street.
Both sides have unleashed potent, well-heeled lobbying operations. Their efforts will converge on two weeks or more of negotiations between House and Senate lawmakers who are working to blend two separate financial overhaul bills into one.
The Senate bill contains a measure that would require the Federal Reserve to set limits on what fees banks and credit card networks can charge merchants for a debit card payment. The House bill has no such provision.
First, a quick lesson in shopping. A debit card payment taps directly into a customer’s bank account and, as such, is akin to writing a check. A credit card payment, on the other hand, is in effect a loan from the bank. One carries more risk than the other.
“We are convinced that fees to consumers would go up and services would be reduced.”- Americas for Visa Inc.
As a result, banks and credit card networks generally charge merchants up to 3 percent for credit card use. For debit card use, the charge to merchants is one-fourth to one-half as much.
Merchants maintain that the fee charged for debit cards, also called an “interchange” fee, is too high. Banks and Visa and MasterCard say the fee takes into account the cost of setting up and maintaining a secure and sophisticated debit payment system.
Last year, $1.21 trillion in purchases were paid with debit cards processed through the Visa and MasterCard networks, generating in $19.7 billion in fees paid by merchants, according to data from The Nilson Report, a trade publication. Most of the fees went to banks that issue debit cards.
http://minnesota.publicradio.org/display/web/2010/06/07/debitcardfees/
@2 years ago
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