Debit Card Fees Reduced and Capped

By Lucy Mitchell
Dec 17 2010

The Federal Reserve announced this morning in Washington that they have capped debit card fees charged by banks at 12 cents per transaction.

Retailers from all over the US mounted a war against banks that were rapidly increasing their fees for debit card transactions. As such the Federal Reserve decided that a cap was the best way to reduce the friction between retailers and the banks that charged the fees.

However, there is now a problem emerging with the industry. Standard credit card companies are normally responsible for the transactions through the terminals which means that their ability to charge the banks inflated processing fees has been diminished.

Visa and MasterCard are likely to be hit the hardest. Most debit cards in the US carry the Visa or MasterCard logo, which means that they share the responsibility for the fees that are charged. With their hands tied by the new cap, many are concerned about the abilities of the credit card companies to make a profit.

Debit cards have become the most popular way to shop, even beating out cash, in the latest poll. The Federal Reserve felt that they had to act to the retailer complaints as most announced that they would stop accepting debit and credit cards if the fees were not controlled.

Banks from around the US have said that the new capped processing fees are not fair and could severely limit their ability to maintain a presence in the market.