Banks and retailers are facing off in Washington, D.C., over a plan to reduce so-called "swipe fees" charged on debit card transactions – and tire dealers will experience the changes.
The fee reduction, scheduled to take hold on July 21, is part of the extensive financial reform legislation Congress passed last year. The law required “reasonable” debit card fees, and in December, the Federal Reserve announced plans to cap fees at 12 cents per transaction – down from an average of 44 cents charged in the past.
The swipe fee reduction will not impact the fees charged to process credit cards, making it likely that consumers will benefit more by using their debit cards vs. traditional credit cards.
Even facing potential higher fees because of the swipe fee change, experts say consumers aren’t likely to drop their debit cards in favor of credit cards. Debit card volume exceeded credit card volume for the first time in 2009, according to reports, and will likely have done the same in 2010. “With memories of the recession still fresh, debit cards have become the preferred payment choice for consumers who want to live within their means,” USA Today reported.
Experts say that a cut in swipe fees could lead to retailers offering across-the-board discounts, similar to “cash prices” offered by gas stations; more perks for debit card users in the form of other discounts or sales; and greater store loyalty awards and extra services – particularly for big ticket or luxury items – for debit card users.
The downside, say experts, are higher bank fees for various services, including ATM fees (especially for 24/7 ATM use), and elimination of “free” checking. And credit card companies may become more aggressive in trying to sign on new customers and encourage card use.
