April 27, 2011

Debit Cards To Get Cheaper For Retailers…Maybe…

Whenever I buy something from an independent retailer – be it a food vendor, craftsman, or independently-owned store – I always ask if they’d prefer I used a debit card over a credit card.  The reason for this is that debit cards typically carry lower merchant fees for retailers than credit cards and I’d like as much of my money as possible going to support the entrepreneur rather than going into the trillion dollar bank fee coffers.

A new rule, set to take effect in July, may make debit cards even more cost-effective for retailers.  Most debit cards currently charge an average of $.44 per transaction.  However, a law that was signed as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act last summer puts a cap on the amount debit cards can charge for a fee to just $.12 per transaction.  That’s an extra $.32 that could now go directly into the retailers pocket!  If you have a lot of customers who use debit cards you can see how this could quickly add up for you.

 Not surprisingly, the banks aren’t happy about losing that $.32 per transaction – which equals approximately $16 billion across the US – and recently helped get the Debit Interchange Fee Study Act in front of the US Senate.  In a nutshell, this new Act asks for more time before the $.12 transaction fee goes into effect so that they can better understand the implications of the law.   There is some speculation that in order to make up for the shortfall banks may start limiting debit card purchases to more than $100 or take free checking away from their customers.

 It will be interesting to see where it all ends up at the end of the day.