Part of the Credit Card Accountability, Responsibility and Disclosure Act mandated that credit card companies had to rein in the fees they charged merchants to process debit transactions. That change could cost lenders billions.
According to a report from the San Francisco Chronicle, Visa and MasterCard – the two largest credit networks in the world – made about $20 billion on swipe fees last year, and all that money came from businesses, both large and small. By changing the rules governing these charges, merchants will save a considerable amount.
"We’ll be delighted to see the fees go down," Rick Karp, the owner of a hardware store, told the paper. "Banks have been getting away with murder for some time now. About 3 cents of every dollar spent in our stores goes to banks for the use of the cards."
However, Visa told the paper that it doesn’t believe these fees are outrageous. By paying that 3 cents on a dollar, they get guaranteed payment, potential for increased sales, faster checkout times, and increased security and convenience that they wouldn’t get if they stopped accepting credit and debit card transactions.
The paper also said that these credit networks are warning consumers that they’ll end up paying the amount lost to the regulation of swipe fees in other ways, either by creating other charges or cutting back on rewards. In addition, the lowered cost for merchants doesn’t guarantee that the savings will be passed on to customers, they say.
As of July 21, the Federal Reserve Bank had eight months to determine a rate for swipe fees that is "reasonable and proportional" to processing costs, the report said. Doing so takes the power to set these rates out of the hands of major banks. And while these changes only affect debit card transactions, others will allow merchants to decide how they deal with several other types of transactions as well.
The provisions of the Credit CARD Act are designed to give consumers greater ability to handle their credit card debt and offer them more protection from lenders’ predatory practices. In addition to reining in fees, these rules also regulate what kinds of consumers have access to certain types of credit and how lenders can alter agreements.