WASHINGTON D.C. – You know every time you swipe that debit card, the store you’re in is charged up to 21 cents?
Now you know folks bust out those debits for a $2 burger, so imagine having to pay 21 cents of that to the bank– major profit loss, right?
Funny thing is– in 2010, the Federal Reserve initially put that cap on the fee to “help” retailers. They wanted to stop banks from charging whatever they wanted.
At first the Fed was gonna set the price set between seven and 12 cents. But like so many good ideas in Washington, it was ruined by lobbyists. Folks from big banks and major credit cards convinced the Reserve the cap had to be higher to cover things like equipment costs and fraud prevention, so they went with 21 cents.
Store owners were outraged. They complained customers would suffer because they’d have to pass those charges on to them, raising prices. They even filed suit against the Federal Reserve and this week, a judge agreed with them. He overturned the unnecessarily high price cap.
What’s this mean for small businesses?
Paula Chrishon, who runs the Tendrils & Curls boutique in River Oaks, says, “The idea of being charged 21 cents per transaction on top of all the other fees associated with using a debit card (or) a credit card– it’s honestly gut-wrenching. And it definitely cuts into one’s profit margin.”
One financial service firm says the reversal of the 21 cent cap could cut debit swipe fees by 50%, but they predict it won’t go into effect until sometime next year, due to possible appeals.
Still, this could mean slightly lower prices if merchants decide to share the wealth. But will they? Don’t bank on it!