Wednesday, July 6, 2011

Consumer to Pay More For Debit Card Transactions

Here is a little something you can thank the Obama administration for. You know those debit cards that we’ve gotten used to using as a super easy convenience? It looks like now we are going to have to pay for that ease of use. In the past, financial institutions charged fees to merchants and heavily penalized consumers who got careless.

The new financial reform bills recently passed in Congress is going to blunt the bank’s ability to charge those fees, which garnered more than $50B.

For years, banks subsidized most debit-card holders by levying heavy fees on retailers and overdrawn consumers. Merchants paid a processing fee averaging 44 cents every time a shopper swiped a card. And careless cardholders typically got dinged $35 every time the bank covered an overdraft.

Last year the nation’s banks collected more than $50 billion from merchant fess and overdrafts, including checking and ATM balance-busters as well as debit-card transactions.

That is likely to decline, however, thanks to new rules mandated after the nation’s financial crises. Starting in October, merchants will pay 21 cents per transactions for debit processing. (Source: Seattle PI)

If you think the banks are going to absorb these costs out of the goodness of their hearts, then you just haven’t been paying attention. Capitalism requires every business to make a profit. And when you have a money-making machine like the debit card, the smart thing is to figure out a way to keep the golden goose laying those awesome eggs. Now that the Obama administration has tied the banks’ hands, they are going to pass this along to the consumer.

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