What New Swipe Fee Legislation Means for Your Business
On October 1, new swipe fee legislation went into effect, lowering to 24 cents (from an average of 44 cents) the amount debit card issuers could assess on transactions. Like most legislation or regulation that potentially lowers profits for one business or the other, this new legislation had a torturous history from its beginning as part of the Dodd-Frank financial regulation bill. It was fought for by small businesses, lobbied against by banks, and tossed back and forth between Congress and the Federal Reserve. But in the end, while the new cap wasn’t quite the change many small business owners had hoped for, most felt it was better than the status quo.
Many retail businesses eagerly looked forward to the Oct. 1 date and the lower swipe fees they would be required to pay. However, it is apparent that although banks achieved a much higher fee (thanks to the Fed rule) than was originally proposed, many banks have also implemented additional fees for debit card users, intended to raise revenue lost by the interchange fee cap. Witness the hubbub over Bank of America’s new $5 monthly debit card fee. Visa and MasterCard have also begun alerting banks that they would treat the Federal Reserve swipe fee cap as a minimum fee, guaranteeing fee hikes for merchants, including those who process payments via debit and credit cards at very small amounts.
If there’s a moral to this story, it seems to be that the banks will find a way to reap profit from debit card transactions one way or the other. At this point, a great deal of the burden still falls on small businesses. No relief appears to be in sight.