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Amendment on Debit Card Interchange Fees and Its Impact to Reward Checking


Yesterday the Senate approved an amendment to the financial reform bill that could have significant impact to debit cards and the fees retailers pay. A major reason reward checking accounts are able to pay high yields is due to the interchange fees that retailers pay every time you use your debit card. The amendment would require the Federal Reserve Board to set "reasonable and proportional" interchange fees for debit cards. It would seem likely that this would impact reward checking accounts.

This commentary at The Daily Caller contends that the amendment would just shift costs to consumers. It describes what happened in Australia when similar laws were enacted:

In reviewing Australia’s caps on interchange fees, for instance, the GAO noted in its November 2009 study that in response to these controls, card issuers "reduced rewards and raised annual fees" for Aussie card holders. Worse, it appears that none of the $1 billion in savings that merchants received as a result of lower fees were passed on to consumers in the form of lower prices., the GAO noted.

The amendment excludes cards issued by banks and credit unions with assets of less than $10 billion, but that didn't satisfy concerns from the Credit Union National Association which argues that it "would not do a great deal of good for credit unions and consumers." As described in this CNN article, "analysts suspect Visa and MasterCard will simply choose to levy the lower interchange rates across the board, on all debit purchases."

In addition to reducing interchange fees, the amendment could have other effects on reward checking customers. It may become more difficult for consumers to make small debit card purchases. As described by Bloomberg, "The amendment permits retailers to offer discounts for cash, checks or debit cards, or for a particular card brand, and would let merchants set minimums and maximums for credit-card purchases."

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flat broke
flat broke   |     |   Comment #1
thanks dick durbin for completely destroying rewards checking accounts in one fell swoop. 
Anonymous   |     |   Comment #2
If this goes through, this is what's going to happen:  Prices will remain the same, but merchants will tack-on fees for using credit and debit cards.

This is really going to cause problems with folks who buy and sell on the Internet.
Anonymous   |     |   Comment #3
Who is out to protect us savers? If this passes, the merchants will just bloat the price for any card swiping and then offer a bogus discount for cash transactions. 
No Stocks 4 me
No Stocks 4 me   |     |   Comment #5
Face it folks, they (feds and banks) are doing everything they can to make it useless to save anything. The BS no inflation was trumped up to make it easy to say NO COLA's, and drop the interest rates to 0 or less if they can come up with as minus figure to pay out to savers. For those who saved to make something to help pay the bills, are SOL, and if your in the situation of having saved anything, and you have no retirement or SS income worth a crap, you'll end up having to dig into that savings you spent all these years to accumulate, till there's nothing left. And hope you have health insurance.
Anonymous   |     |   Comment #6
Kiss goodbye reward checking accounts.  Who elected these idiots (democrats) in  Congress and why they are trying  to ruin our already miserable lives. Merchants will refuse to accept small purchases with debit or credit cards or will add convenience fee and keep the fees for themselves instead of passing it to the originating banks. No justice for the consumer.
Anonymous   |     |   Comment #12
A debtor whose loan comes due must get the money from some source. One source is private savings. The people running government and the finance industry are well aware of the money held in bank checking (and savings) accounts. They would rather that money directly fund government debt.
Anonymous   |     |   Comment #13
Well, I can always revert back to the pre-1980s way of paying - by cash and check.  Why not charge a fee for all electronic forms of payment?  Make Direct Deposit transactions fee based just like ATM surcharges. It's too bad that money has to go through banks and the major transaction processing hubs.  Without them we would have to carry wads of bills around.

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