Major credit card companies are increasing the fees merchants pay for small debit purchases, a move that analysts say could discourage some store owners from accepting debit cards for small transactions.
According to an article from the Wall Street Journal, financial analysts believe credit-card companies plan to increase the fees to 23 cents per transaction. Right now, retailers pay about eight cents for a $2 debit card purchase.
Why the change? The Federal Reserve Board finalized rules in June that limit the fees merchants pay to 24 cents per transaction when a consumer uses a debit card. The cap only applies to financial institutions that have $10 billion or more in assets.
The limits are tied to a provision in the Dodd-Frank legislation known as the Durbin amendment.
While the credit card companies are charging the fees, the money goes to the banks. Analysts say this is a move to help the banks recoup some of the revenue they’re losing under the new caps.
Consumers will bear the brunt of the cost increase. Debit card fees will hurt low-income people the most.
Other experts say the increase “will kill the economics for small-ticket debit purchases” and will “almost certainly lead to a merchant revolt against the card networks.”
Source: WSJ, September 2011