Swipe Fee Changes

The Federal Reserve voted to cap swipe fees -- the amount banks charge merchants to process debit-card payments -- at 21 cents, down from the current average debit card transaction cost of 44 cents, but up from the original proposal of 12 cents per transaction. If banks and other financial institutions comply with fraud prevention standards, they can charge an extra penny plus an additional 0.05% fee based on the value of the transaction. Thus, on a $100 purchase, the bank can charge 27 cents for card processing.

The Fed also voted to delay implementation of the cap from July 21 to October 1. Overall, banks will see their revenue from these automated transactions decrease by about 45% said the American Bankers Association. Banks generally eliminated free checking, card rewards programs, and other basic banking services in response. The new rule exempted small banks and most credit unions from the cap.

In theory, marchants should be able to pass along these savings to customers in the form of lower prices. In practice, the savings may do more for the retailer's bottom line than for a customer's wallet.