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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.

By Stacy Johnson Jun 30, 2011 12:29PM

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:

Jul 4, 2011 6:44PM

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...

Sep 23, 2011 8:21PM
i wonder how many jobs will be lost or created  with this new regulation?  and how much money the government willl steal this time around; 
Jun 30, 2011 9:00PM
How did you think they financed rewards cards? 
Jun 30, 2011 11:03PM
yeah, I feel real sorry for walmart and target and the other poor retailers, only getting to keep 1/2 the savings given to them by politicians by penalizing banks. banks made their mistakes and have paid for it with being over-regulated, hated and blamed by newscasters and politicians for every evil thing that happened to the economy.  I think the bank hating has gone a bit far.  Why not focus a bit of sarcasm on the politicians and regulators that forced the banks to make loans to anyone wanting a home?  Or perhaps on the politicians that effectively forced even the strongest banks to accept the TARP funds as capital to help bail out failing institutions, then accused them as accepting bailout funds while not allowing them to repay the funds until strength tests.  Don't focus on truths, rather what makes you popular with news watchers and political bases.  Try to point the accusatory finger at others besides just banks.  Most bankers have worked entire careers trying no more than to aid individuals and businesses in being sucessful, and have never received a single 5 figure bonus in their entire careers.
Jul 1, 2011 9:31AM
Just a little biased are we? If the average was .44 and the fed was talking .12, and we ended up at .21, that appears to be a very fair compromise. Is your name really Obama?
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