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More bank fees on the way?

Swipe fee reform isn't necessarily a victory for consumers, as banks are likely to make up the lost revenue in other ways.

By MSN Money Partner Jun 10, 2011 11:58AM

This post comes from Matt Brownell at partner site MainStreet.


A fevered lobbying war came to an end this week as the Senate rejected a measure that would have delayed implementation of debit card swipe fee reform by a year.


Lobbyists for the retail and banking industries have been playing a tug-of-war for the hearts and minds of representatives in Congress since the Durbin Amendment to the Dodd-Frank financial reform bill gave the Federal Reserve the power to limit interchange fees on debit card transactions. The Fed took that mandate and ran with it, doing away with the 1% to 2% fees that card issuers charge retailers on each transaction and replacing it with a flat fee of 12 cents per purchase.


The change, which beat its main congressional challenge on Wednesday, should provide significant relief to retailers and eat into the profits of the banks that issue the cards and rake in $16 billion a year through such fees.


"The Senate has essentially said it is fair for one industry to reap what another has sown, and American consumers will now have to pay more for basic banking services, while big-box retailers go off and count their unjustified profits," said the American Bankers Association in a statement.


The retail industry celebrated its victory, with the National Retail Federation calling it a "landmark victory for American consumers" that would "allow retailers to hold down prices for consumers." Post continues after video.

Will retailers hold prices down?

Still, swipe fee reform isn't necessarily a victory for consumers. The banking industry has long argued that it will be forced to pass its losses on to consumers in the form of increased fees. The prospect of looming swipe fee reform has already contributed to the phasing out of free checking accounts at many of the nation's largest banks.


Indeed, the ABA's statement described swipe fees as "a key source of revenue that allows (banks) to offer low-cost banking services to everyday consumers and supports lending and fraud protection measures" -- a clear hint that such services could be phased out when the swipe fee pipeline dries up.


And Bill Cheney, president of the Credit Union National Association, predicted that "credit unions will have no recourse but to make up these costs by imposing new fees or service restrictions on their members."


Meanwhile, all eyes will be on retailers to see if lower swipe fees will really allow them to hold down prices when the new rules go into effect on July 21.


Wednesday's vote was undoubtedly a victory for the retail industry, but with more expensive banking services almost certainly on the horizon and an unclear future for retail prices, consumers may be the ones to suffer the consequences.


More on MainStreet and MSN Money:

Jun 10, 2011 12:28PM
Sure they will. Do what over 100 m illion Americans have done and that is to switch to credit unions. Screw the banks. Lol Lol Lol
Jun 10, 2011 3:00PM
The banking industry has long argued that it will be forced to pass its losses on to consumers in the form of increased fees. 

What losses???????????????   You mean, decreased profits.  This trick in nomenclature has been used by industries for years, particularly lobbyists, whenever they wish to threaten "the end of civilization as we know it", or something akin to the industry leaders making less money.  The industry will only be "losing" an unwarranted asset in its balance sheet it has grown used to, but never earned. They've been charging credit card usage based upon percentage, but does it really take any more effort for their computer programs to tally up the cost of a charge if it's $2000.00 vs. $2.00???  The cost of handling either charge is the same, they can screw up either transaction just as easily. 


"The Senate has essentially said it is fair for one industry to reap what another has sown, and American consumers will now have to pay more for basic banking services, while big-box retailers go off and count their unjustified profits," said the American Bankers Association in a statement.

And the bank's profits are all 100% justified?


Dear American Bankers Association,



We just bailed many of your asses out of an economic morass that we are still in the midst of.  And if  "big-box retailers" are making unjustified profits because of this legislation, then are all the private, non-chain retailers that reluctantly accept credit cards in order to sell most of there merchandise or services also guilty of "unjustified profits"?


How about this idea - you keep your fees and transactions as they are, but from now on, there will also be a fee if YOU make a mistake.  You charge us fees if we have an overdraft.  Fair enough.  We charge you a fee (or the government charges you a fee) every time you make a mistake in any customer's account.  Even if it's just a printing error on their monthly statement.  And the fee will be based upon the size of the transaction, just like credit cards. 


Good idea?  Hello?  Mr. American Bankers Association president?  What, no comment?  :)

Jun 10, 2011 2:44PM
Ultimately it didn't really matter what was done or not done by Congress.  Sadly no matter which way the legislation would have went, we the American consumers will still pay more.  Banks and retailers alike will fleece us any way they can.
Jun 10, 2011 3:45PM
Let me cry a few crocodile tears for the poor bankers. If I put money into a SAVINGS account they give you less than a third of One per cent interest. If I put money into a one year CD I get paid slightly over one per cent. If they loan me money for a house or car what is it five or six plus per cent? If they issue me a credit card the rate is 17 - 21 -29 % Who's kidding who? They are paying so little on interest to borrow your money but the spread is incredible when you borrow their money!  I propose limiting credit card fees to 10% Maximum. House loans at no more than 7%. If you can't make enough profit at that margin then you need to find some other form of thievery. Free Checking Accounts .....that's a joke. I have to keep in a thousand dollars at almost zero per cent interest to keep that free account from costing me. They loan it out at $60 ...$170 ...$290....all the while paying me $2.50.   The only people worse than banks are Pawn Shops and Check cashing facilities.
Jun 10, 2011 1:38PM
credit unions for sure, i just checked one out in ct. charter oak and i'll be going down to talk with them this afternoon, screw the banks. can't make any money anyways, just take it out and buy a safe.
Jun 10, 2011 5:53PM
Are we supposed to feel sorry for the banks? First we bail them out and they pay back the loans at ninety cents on the dollar. The banks then hold back funds and loans from the very consumers who's tax dollars were used to bail out the banks. And now the banks won't be able to collect the outrageous debit card and credit card transaction fees they are used to getting from the various businesses and merchants. And heaven help them (the banks) from losing money when they have had some of the highest earnings during this recession. And they will end up finding ways to charge consumers in order to make up the difference. If you haven't changed your accounts from banks to credit unions, I suggest you do it now. My girlfriend and I did this past year. Enough is enough with these banks.
Jun 10, 2011 3:00PM
i agree nobody wins in this situation.  lets see if the retailers keep prices down bet not.  the banks will not also but they will be recovering income lost. the retailers will just be making more.  and... when you all go to your credit unions ask them how much they pay in a franchise fee or income tax that funds your school sytems and roads.  i bet they will not have an answer becasue they dont pay anything!. 
Jun 10, 2011 2:27PM

Yep, credit unions!   They're the way to go and they provide credit/debit cards and checking.  Works just like one of those crummy box banks however without any stupid fees. 


Banks can go threaten their pets, how dare they threaten the American people!  We bailed their stars out!!!!    And its the credit card companies that need some regulating.

Jun 10, 2011 5:12PM
More bank fees on the way?
More credit union accounts then.

Jun 10, 2011 8:07PM
I am currently making plans to leave my bank, Citibank, anyway!  They are a terrible company to deal with.  I will be going with a credit union.  I hope all the banks fail and go out of business and they lose their homes after what they have done in this "so called" mortgage modification fraud. And they even stole 700 billion dollars from Us!!
Jun 13, 2011 10:15AM
The Senate has essentially said it is fair for one industry to reap what another has sown, and American consumers will now have to pay more for basic banking services, while big-box retailers go off and count their unjustified profits," said the American Bankers Association in a

Whose unjustified profits?


It seems like the person charging a swipe fee is the one riding on someone else to get some money. After all, the credit card itself is the object that pays the banks. I have an agreement with the bank to pay on my financial vehicle. That in and of itself is supposed to pay for the use of it.


So charging a retailer a swipe fee is what? uh...unjustified profit it seems.


Retailers and IT networks have built credit card usage at retailers. Retailers pay for the machines, they pay for the networks, they pay marketing to attract customers, etc, etc. So what exactly are banks talking about? What did they sow?


I don't see anything. It looks like everything else they do. Someone else builds everything, promotes everything, takes all the risk, and banks try to make profits off fees on everyone else involved. And then, when things go bad, they (banks) look for a hand out.


The worst thing is the hand out didn't go to consumers (which was the entire point of stabilizing banks) to help the general credit within the economy. Meanwhile, how many retailers got bailed out?

Jun 10, 2011 7:26PM
Another part of the whole problem is the "Rewards Cards." These are a total rip-off of the retailer, since the retailer pays a premium on each Rewards Card that's swiped. No, the bank isn't giving you free money or airline miles or hotel stays. The retailer is paying extra to take those cards, and then a small slice of the extra charge to the retailer is given to you in the form of your rewards, the bank keeps a slice, and the transaction processors take a slice. What happens? The everyday consumer pays extra to cover the added cost of the transaction for the retailer. Those who don't have a rewards card pay more for those who do, especially the person who pays cash - unless they can negotiate a discount.
Jun 10, 2011 7:22PM

What if we all just paid cash? The retailer would get twelve cents more per transaction in profit. The bank wouldn't be out the excessive fees, and wouldn't have to charge the account holder. And, we'd conveniently be able to use all the money the Fed is printing! This sounds like a win-win situation.


Sure, there's a huge profit in handling the transactions, but it costs almost nothing to handle the electronic transaction - unless you introduce the fact that companies want to make an outrageous profit for handling the transaction.


Here's how my wife handles her bank: she's on her accounts, her mom's accounts, and her son's accounts. 7 accounts all together. Every time the bank wants to change her "free checking," she has the pull up all the accounts she has her name on, and then looks them in the eye and asks if they'd like to see all that money walk out the door. Free checking with free checks for life for her!


On the other hand, I bank at three different credit unions. I buy checks from time to time (rarely) through Costco. I pay no fees either.

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