What the Biggest Banks Won't Tell You About the Fees Behind Using Debit Cards

by Sarah Grotta 0

In an opinion piece in The Hill, Lyle Beckwith, senior vice president of government relations at NACS, the National Association of Convenience Stores expressed his views on Durbin and interchange fees in support of his constituency. Warning, not all will agree with the assertions made in this blog, but it is a good overview of the prevailing arguments for a portion of the merchant community:

The Durbin Amendment said debit cards at least should be open to competition and that banks that still won’t compete must at least charge no more than a reasonable profit – what the Federal Reserve generously determined to be about a quarter on every transaction.

Yet the banks’ costs of doing this business are so small that they are still gobbling up an average 500-percent profit on each transaction, according to figures the banks themselves report to the Fed.

Durbin is old news, but the reason for a re-hash of the topic is the effort being made in congress to repeal Durbin:

Now Jeb Hensarling, chairman of the House Financial Services Committee, has said he’ll include repeal of debit reform in his bill repealing Dodd-Frank.

The banks fight so hard against debit reform not only because they miss the price-fixing they enjoyed before on debit cards; they also fear there will be more scrutiny of price-fixing fees on credit cards.

Overview by Sarah Grotta, Director, Debit Advisory Service at Mercator Advisory Group

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