Swipe fees debate continues
Swipe fees or no swipe fees – the battle rages on. The increasingly-heated debate centers around the approximate $48 billion that merchants pay to banks and credit card companies for the use of credit and debit terminals. Swipe fees are now being fought over in a congressional conference committee that’s considering a package of reforms for the financial services industry.
Sen. Dick Durbin, D-Ill., introduced three amendments to the bank reform bill to control how much credit card issuers charge merchants when consumers pay with a credit card. The measures would make several changes. From the banks’ perspective, it would require the Federal Reserve to set reasonable and proportionate fees that merchants will have to pay banks, and Visa and MasterCard, to process debit card transactions. Merchants currently pay a percentage of the total transaction, not a set fee based on the cost of the transaction. The new measures would give merchants more control over the transactions.
Some are calling the measures unfair, saying the cost to use credit cards gets passed around to everyone, including debit card users. It’s been called a social fairness issue because lower-income consumers and subsidizing a “first class upgrade.” Swipe fees are set by MasterCard and Visa, and average about 2 percent for credit card transactions, and are higher for rewards or corporate cards.
Banks don’t seem to care much about social fairness, with $48 billion at stake. They’ve mounted a major lobbying campaign to oppose the proposals. The American Bankers Association says the debit card issue has nothing to do with the financial crisis and does not belong in the financial reform bill.
The proposals would also have a dramatic impact on merchants, who have seen credit and debit processing fees increase more than five times what they paid a year ago. These merchants say they are paying for the reward points and air miles.
Durbin’s measures also call for the lowest rates possible to apply to government credit card transactions, noting that consumers are using credit cards to pay their taxes, toll fees and dog licenses.
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