New Swipe Fees Could Cost You
Will new swipe fees put plastic on ice?
Debit cards: Take out a little piece of plastic, swipe, approve, done.
Cash: Dig through your wallet to see what bills you have, take out the correct number of bills, wait for your change, put money back into wallet, careful not to drop any coins, wallet becomes a bit heavier…and finally, done. No wonder the majority of payments are paid with credit or debit cards.
Consumers prefer to pay with plastic because it’s not only easier for them, but it also gives them rewards. For example, every time I swipe my debit card, a dollar gets transferred into my savings account, which gives me back interest. But with the recent vote regarding transaction fees, policies may start changing. The Federal Reserve has lowered the permitted swipe fee for card transactions from 44 cents to 21 cents. Many banks were outraged at last year’s proposal of cutting it down to 12 cents, which would’ve been a 73 percent decrease.
After six months of successful lobbying, they raised it to an in-between number: 21. Swipe fees generated about $16.2 billion for banks in 2009, according to The Washington Post. In 2010 alone, U.S. shoppers swiped their debit cards 37 billion times. So now that these “swipe fees” have been lowered, what does this mean for consumers?
• The Good: Business owners will be able to save thousands of dollars from transactions throughout the year. By association, they may choose to pass down the extra savings to their shoppers.
• The Bad: Banks, on the other hand, will lose those thousands of dollars. They’re going to start making changes to their policies to make up for lost profits. The top U.S. banks, like Wells Fargo and JPMorgan Chase have reduced reward programs for their customers. The Bank of America will start implementing a $5 fee for lost cards in September.
According to Bankrate.com, 65 percent of checking accounts offered by the nation’s largest banks impose no monthly maintenance fee. With the recent ruling however, the number of free checking accounts is going to decline. On July 29, U.S. Bank will increase its annual fee for individual retirement accounts to $30 from $10. The fee will be waived for customers who have a balance of $25,000 or more in an IRA or other U.S. Bank accounts. Make sure to see if your bank has imposed any new policies as a result of the new swipe fee to avoid any unwanted charges. Also, get an update on any reward programs you’re currently enrolled in.