Credit Card Relief

 

You may have heard a lot of talk about “swipe fees” recently. Swipe fees are the amount of money banks are allowed to charge every time you swipe your debit or credit card at the store. The fee varies depending on what kind of card you use, but the bottom line is this: banks are making billions from swipe fees and they’re costing you more money every time you go shopping.

The bank usually charges the swipe fee to the retailer, meaning the store pays a small fee for every credit or debit card transaction. But stores are passing some of the costs to you in the form of higher prices.

In July, the Federal Reserve nearly doubled the amount it would let banks charge for swipe fees on credit card purchases. Why?

Well, it costs a bank about 4 cents to process a debit card transaction, but they’ve been charging retailers as much as 56 cents to cover the costs. That put nearly 16 billion dollars in the pocket of big banks in 2009 alone.

2010’s Wall Street reform bill required the Federal Reserve to write a rule capping swipe fees on debit cards. The Fed had said it was going to cap swipe fees at 12 cents, but the swipe fee debate dominated Congress for months, with the U.S. retail industry fighting against big banks.

In July, the Fed caved to pressure from big banks, raising the cap to a maximum of 24 cents per swipe. That might not sound like much, but it adds up to billions of dollars per year.

The Fed also said its rule won’t go into effect until Oct. 1 2011 instead of July 21, when the regulation was originally expected to be put in place. The extra months of higher swipe fees will mean much better 2011 earnings for banks. In fact, Wall Street scores $1.35 billion for every month that the rules are delayed.

Since most of the fee is paid by retailers, they have no choice but to raise prices, passing the pain to you the consumer.

For now, it seems the only way to avoid spending more at the store is to spend less overall. By not splurging on impulse items you’ll keep more money in your pocket. Stick to a budget, use cash when possible and pay with a check rather than a debit card. Avoid using credit cards that can saddle you with debt and high interest fees.

If you need help getting your finances under control you can contact one of CCR’s specialists toll free at 1.866.345.3077. Or click here to check out our new easy to use debt calculator.

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