Home | Media Center | Retailers Win Debit-Card Swipe Fee Battle

June 28, 2010

Members of the House and Senate announced an agreement to include debit-card fee cuts in the final version of the financial-overhaul bill. Retailers have long sought to reduce the "swipe fees" that credit-card companies charge merchants for every debit-card transaction.

It's still unclear how much the estimated $20 billion a year in debit-card fees paid by U.S. merchants would be reduced under Congress's proposal to have th em regulated by the Federal Reserve, but experts told the Wall Street Journal it could be cut by half or more.

Retailers, restaurateurs and gas-station owners have long complained about the so-called interchange fees charged by banks for Visa Inc. and MasterCard Inc. debit cards, which average roughly 1% to 2% of the total transaction amount—far more than similar fees to process paper checks. Such fees are regulated in dozens of countries, including France, Germany, Brazil and Mexico, but not in the U.S., where they are more than twice as high as in Europe.

In arguing against the legislation, banks have contended that they will be forced to raise other types of fees and eliminate rewards on debit cards to make up for lost interchange revenue.

The legislation still only applies to debit cards, not traditional credit cards, and thus covers less than half of the annual interchange fees U.S. merchants pay, estimated at $48 billion by the Nilson Report, an industry newsletter.