Big Creditors Threaten Cap on Debit Cards
The so called ‘Durbin Amendment’ passed by congress last year, limits the amount of interchange fees (or swipe fees) that credit card companies can charge retailers. Because of this, several big credit card companies (Chase, Citi, Bank of America) are retaliating.
These major creditors are considering capping debit card use to $50 or $100 for transactions. Why? Well, creditors are losing money it’s no surprise. People have been burned by credit card companies by getting into so much debt they cant get out. As we also know, creditors don’t make it easy to get out. Consumers have resorted to using debit cards as a practical means to manage debt. Retailers have complained about rising swipe fees. Everyone is fighting back.
As a means for credit card companies to recoup lost revenue, these caps would restrict consumer transactions, thus hurting retailers. Starting to see who is in control here? Well, congress last year finally recognized the mob-like fees and charges credit card companies squeeze out of retailers and customers alike. The Durbin Amendment saved over $1 billion for users and merchants. While creditors won’t go on record about potential caps, the more likely solution would be annual fees for debit cards. Either way the consumer loses.
Prior to the Durbin Amendment, credit card companies collected $0.63 cents per swipe, per transaction or $15 billion dollars per year. The new rate is $0.12 cents per transaction. The banks accuse the Fed of price fixing. The final ruling will be released in April.
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