Banks win swipe fee battle after all
The banks were expecting bad news from a final Fed vote on debit card swipe fees. But what they got instead was proof that massive lobbying pays off.
This post comes from Stacy Johnson at partner site Money Talks News.
As we reported in "Fed to cast final vote on debit card fees," the Federal Reserve was poised this week to nail big banks by radically reducing the fees they collect for processing debit card transactions.
So-called "swipe" or interchange fees now average 44 cents per transaction, but were set to drop to 12 cents. That would have been a boon for the merchants shouldering the expense and a bust for the banks, which now take in about $16 billion a year from those fees. After a final vote on June 29, the new rules were slated to go into effect on July 21.
As has happened with the banking industry on so many occasions, they managed to dodge a bullet. Post continues after video.
After months of intense lobbying to convince the Fed that 12 cents isn't enough to profitably process debit card transactions -- and threatening to replace the lost revenue by raising fees on things like checking accounts -- banks managed to cajole the Fed into capping rates at 21 cents. Banks can also charge 0.05% of each transaction as reimbursement for fraud losses, and the Fed may let them collect another 1 cent per transaction if they take steps to prevent fraud. The start date was also pushed back from July 21 to Oct 1.
If there's any doubt as to whether this was good news for credit card processors, Visa's stock closed Wednesday at $86.57 per share, up $11.29 or 15%. MasterCard finished the day at $309.70/share, up $31.47, or 11%.
Of course, most major banks that will benefit from the Fed's generosity already starting raising fees months ago on checking accounts and other products in anticipation of this revenue setback.
Now that they've scored a multibillion-dollar victory at the expense of retailers, will they start announcing rollbacks of recent fee hikes?
I wouldn't hold my breath.
More on Money Talks News and MSN Money:
Whatever the number is the banks will still pass it on to the consumers and also think of other ways to fleece the sheep. We are in an absolute no win situation with banks/corporations they will always- ALWAYS refuse to eat even a minor rise in operating cost or loss of revenue even if they look at profits with 9 digits.
The banks have essentially forced mass debit card use and make billions. I guess hundreds of millions could never be enough...
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