Durbin: Lower debit card swipe fees good for consumers

By:  Brandy Donaldson
Moline Dispatch & Rock Island Argus

ROCK ISLAND -- Beginning Saturday, banks and credit card companies will be forced to slash the fees imposed on businesses for debit card transactions -- a move praised by merchants, but decried by the banking industry, which is already showing signs of backlash.

U.S. Sen. Dick Durbin, D-Ill., stopped by Rock Island Country Market, 2252 24th St., Friday morning to celebrate the move, which he contends will benefit consumers by increasing competition and allowing merchants to hand down more discounts and lower prices.

"Most retailers have no bargaining power when it comes to how much they're charged for the use of debit cards," Sen. Durbin said Friday. "They either take it or leave it. And it's almost impossible now for a business to operate without using plastic. ... That leads to higher prices for consumers and less profitability for businesses. Tomorrow, that world changes."

Every business in America that accepts plastic pays what's known as an interchange fee or "swipe fee" on each individual debit card transaction. The average swipe fee per transaction in the U.S. is 44 cents.

"Imagine if you come into Country Market here and buy coffee and a donut for 99 cents and use a debit card, that means that (store manager) Karl is going to pay somewhere in the range of 44 cents to the credit card company. There goes his profit," Rep. Durbin said.

Swipe fee reform was authored by Sen. Durbin as an amendment to the Wall Street Reform Act. It set the ceiling on swipe fees at 24 cents, almost half the current national average.

According to the Federal Reserve, it costs only 7-12 cents per transaction for the banks and credit card companies to process a debit transaction and in Canada there are no swipe fees to retailers, Sen. Durbin said.

"Those who are complaining, the banks and credit card companies, are actually going to still be entitled to up to 100 percent more than their actual cost for use of the debit card," he said.

Karl Schierbrock, store manager of Rock Island Country Market, praised the new mandate, saying that 60 percent of the transactions at his store are paid with plastic. Consumers will see a direct benefit of lower prices, he said.

"When you give an edge to a retailer, they can reduce prices and enter into competition," Sen. Durbin said. "But when they're stuck with these overhead costs that they can't even touch as part of their bottom-line, it hurts competition."

Backlash from the banking industry, which lobbied heavily against the new regulation, is fairly certain, Sen. Durbin said.

Bank of America Corp., for example, has said the new mandate will cost it $2 billion a year. To recoup that revenue, the bank will begin charging customers $5 a month to use their debit cards. Other large banks are likely to follow suit. Wells Fargo & Co. and JPMorgan Chase & Co. are testing a $3 monthly fee in select states.

Sen. Durbin encouraged consumers to protest these new fees by pulling away from the large banking corporations in favor of smaller community banks.

"A lot of these banks are screaming bloody murder. ... If you think the debit card fee that Bank of America is going to impose is unreasonable, go shop around and find yourself another place that is going to treat you a lot better," Sen. Durbin said.