U.S. retailers paying US$0.24 every time a customer swipes a debit card under new rule capping fees banks are allowed to charge, down from average of US$0.43 before rule took effect, reports Federal Reserve

Cindy Allen

Cindy Allen

May 1, 2012 – Associated Press

WASHINGTON , May 1, 2012 () – Retailers are paying significantly less every time a customer swipes a debit card under a rule capping the fees that banks are allowed to charge.

The Federal Reserve says in a report Tuesday that the average fee paid by merchants for debit card transactions covered by the rule was 24 cents in the fourth quarter of 2011. That compares with an average of 43 cents before the Fed's rule took effect Oct. 1.

The rule was mandated under the 2010 financial overhaul law. For most transactions, banks can charge merchants a maximum 21 cents for each debit card transaction plus an additional 0.05 percent of the purchase price to cover fraud protection costs.

Transactions using debit cards issued by banks with less than $10 billion in assets, as well as some prepaid debit cards, are exempt from the cap.

The average fee paid by merchants for those exempt transactions remained at 43 cents in the October-December quarter, the Fed found. Overall debit card fees — for transactions both covered and exempt from the cap — averaged 30 cents.

The Fed also said that as a result of the cap, the gap narrowed between fees on debit card transactions requiring customers to sign and those requiring a personal identification number. Fees on signature transactions covered by the rule averaged 24 cents in the fourth quarter, close to the average for PIN transactions of 23 cents. That compares with an average 59 cents for signature transactions and 34 cents for PIN transactions from Jan. 1 to Sept. 30, 2011.

The cap was the first limit ever on debit card fees, which banks traditionally had negotiated with merchants.

Before the Fed set its level last June, merchants had said that reduced fees would allow them to lower their prices for consumers. Banks, on the other hand, had warned that a limit on what they can charge retailers would force them to cut back on other services, such as free checking and rewards programs.

A coalition of retail groups sued the Fed in November, asserting that the regulator ignored the law by setting too high a cap on debit card fees.

The National Retail Federation and other groups said the Fed buckled under pressure from bank lobbyists when it set the cap, which is significantly higher than the Fed's initial proposal of 12 cents.

© 2021 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

Share:

About Us

We deliver market news & information relevant to your business.

We monitor all your market drivers.

We aggregate, curate, filter and map your specific needs.

We deliver the right information to the right person at the right time.

Our Contacts

1990 S Bundy Dr. Suite #380,
Los Angeles, CA 90025 795

+1 (310) 558 0008
+1 (310) 558 0080 (FAX)

About Cookies On This Site

We collect data, including through use of cookies and similar technology ("cookies") that enchance the online experience. By clicking "I agree", you agree to our cookies, agree to bound by our Terms of Use, and acknowledge our Privacy Policy. For more information on our data practices and how to exercise your privacy rights, please see our Privacy Policy.