Battle over debit card swipe fees goes on
— -- When gas prices edged above $4 a gallon earlier this spring, the Merchants Payments Coalition, a group that represents retailers, said "hidden fees" charged by banks and card processing companies added up to 10 cents to the price of gas.
The Electronic Payments Coalition, which represents credit unions and community banks, countered that gas would be much less expensive if station owners passed on to their customers an estimated $1 billion in savings from lower debit-card fees.
The gas spat represented yet another skirmish in the battle between the financial services and retail industry over the fees retailers pay banks and card processing networks when customers use their debit cards. The broad financial overhaul legislation that Congress enacted in 2010 required the Federal Reserve to issue rules that place "reasonable" limits on swipe fees. In June, the Fed voted to cap the fees at 21 cents per transaction, plus 0.05% of the purchase price to cover fraud-protection costs.
In a report issued last week, the Fed said retailers are paying significantly less in debit card fees since the rule was enacted — an average of 24 cents per transaction vs. 43 cents before Oct. 1. Critics of the swipe fee rule say retailers have failed to share the windfall with their customers, and some consumers agree.
"I feel like retailers are just enjoying the reduction and not passing any savings on to the consumer," says Amber Flack, 34, of Columbus, Ohio.
Retailers contend that consumers are benefiting and say the drawbacks predicted by the rule's opponents — such as sharply higher bank fees — haven't materialized.
How the reduction in "swipe fees" could affect you:
•You may receive a discount to pay with your debit card instead of your credit card.
Transaction fees for credit cards weren't affected by the Fed rule, so retailers have a strong incentive to encourage customers to pay with debit instead of credit. Gas stations, including Nice N Easy and some Exxon and Arco stations, advertise lower prices for customers who pay with cash or a debit card instead of a credit card. Swedish furniture store IKEA offers savings vouchers to customers who opt to pay with a debit card, good toward their next purchase.
•You may have to pay cash for a cup of coffee or pack of gum.
In the past, card processing networks such as Visa and MasterCard, which set debit card fees and process them on behalf of financial institutions, gave retailers a discount on fees for small transactions, usually of less than $10. Once the cap on debit card fees took effect, though, those discounts were eliminated. Retailers who previously paid as little as 4 cents on a debit card transaction found themselves hit with a 21-cent fee, says Alex Matjanec, co-founder of MyBankTracker.com.
"A customer buying a can of soda on a debit card is costing me more today than it did before the legislation," says Ari Haseotes, president of Cumberland Farms, which operates almost 600 gas and convenience stores in 11 states across the Northeast and in Florida.
Some retailers have raised prices to cover the higher fees, while others stopped accepting debit cards for small purchases, Matjanec says.
•Free checking accounts haven't disappeared.
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