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Home » Debit Card Fees Pit Retailers Against Banks

Debit Card Fees Pit Retailers Against Banks

June 16, 2010 by Publisher

An amendment proposed to the recent financial overhaul bills by Democratic Senator Richard J. Durbin of Illinois seeks to reign in the processing fees charged to retailers for the use of debit cards. In the words of the amendment, the fees charged should be “reasonable and proportional to the actual cost incurred by the issuer or payment card network with respect to the transaction.” What that exactly entails has yet to be determined, but it certainly implies fees lower than what are currently applied.

Although there are benefits for independent retailers in the use of debit cards–convenience for the customer, for example, as well as less bounced checks–many merchants are hesitant to pay too much for these benefits. This is especially true since banks are the ones who pay the fees for processing paper checks, whereas the use of debit cards sticks the retailer with paying a small percentage of the sale amount to Visa, Mastercard, or the issuing bank. If merchants must pay these fees, the thinking goes, the least banks can do is lower the processing fees to something that more suitably reflects the cost of handling the transaction, which is where the proposed amendment comes in.

The financial services industry opposes the amendment, and is in the process of combating it via the use of lobbyists.

“Is the government the one to say what a fair profit should be?” asks Ken Clayton, SVP of the American Bankers Association. “Should the government say what a fair profit is for a pair of Nikes?”

But the retail industry does not see it the same way:

“The current system costs us billions of dollars a year,” explains Mallory Duncan, SVP of the National Retail Federation. “It means we have to up the price we charge the public to cover these gratuitous fees.”

Source: Los Angeles Times

Category: Marketing & Management, Retail News Tags: debit cards, finance

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