I just wish that merchants could pass the interchange fees on explicitly to customers, and so the folks who are paying with cards that have high-interchange fees pay more. I'm sick of subsidizing other people's airline mile because Target charges us the same price no matter how we pay, even if I'm using a cheaper payment method. My understanding is that the credit card companies as part of their merchant requirement prevent that, and it'd be nice to see the government explicitly prohibit that sort agreement. (Some stores creatively work around this by providing a "cash discount" or charge a 'convenience fee')
Maybe the card with the higher interchange fee is worth it for the charge dispute or whatever, but if you want that piece of mind, pay for it your damn self.
I think there's some additional complications that different cards charge different interchange fees and merchants don't find out what that fee is until well into the transaction, so maybe this is harder to do that I realize, but that'd be another spot for some good regulation to make the marketplace more transparent.
Keep in mind that American Express customers tend to spend more. Stores wouldn’t pay these interchange fees if they didn’t think the added spending is worth it.
Cash also is not free to accept. The cost of handling it is quite significant. Time spent on counts, armored cars, change scams, etc., are all added costs.
> I'm sick of subsidizing other people's airline mile because Target charges us the same price no matter how we pay
You should actually love this because fees paid by the merchant are pure gravy for you as the customer. If they could charge more and get away with they should just do that. Externalizing the interchange costs would be a huge win for merchants because they just got free money while keeping the sticker price the same. All the benefit of hidden fees without the needing to hide it part, just like taxes. It would do nothing except make everything 2%ish more expensive for card users while you gain nothing. If you've ever wondered why companies push so hard against requiring display prices to include tax this is why. It's not the high cost of label printing, it's that they would just have to eat the 7% because they can't just hike prices without consumers reacting to it.
Have you never noticed that despite the fact that different retail outlets take wildly different cuts it never manifests in significant price differences? "Cut out the middleman and buy direct" is often the most expensive way to buy something.
In Canada the debit fee is fixed (I think its around 0.10 to 0.40CAD) per transaction, no percentage. That's why you see a lot of places that only accept cash or debit (and not credit cards).
I would be happy as a small SaaS owner and consumer to see those percentage fees disapear. I never have more than 1% cash back on the 3% that CC take.
Square moved to charging a percentage on Canadian debit swipes last month:
> Square’s processing fees are 2.65% per card present transaction, 2.9% + 30 cents per paid Square Invoice and Square Online sale, 3.4% + 15 cents per manually entered transaction and INTERAC debit cards are processed at 0.75% + $0.07 per tap or insert
Unsure if this is pushing new Interac costs to buyers or a profit grab. It was just 10 cents flat per swipe, so anything over $4 and you’re worse off.
They might make the gigantic too-big-to-fail banks want to turn away from lower-profit customers but credit unions are absolutely a thing. In my area, several credit unions offer payment accounts--with debit cards and without a monthly fee--for people who have had accounts closed due to overdraft or who have an ITIN instead of a SSN.
I'm not really moved by "if we don't let the TBTF banks charge whatever they want, they might not like us". We have not-for-profit institutions and community-focused banks for a reason. At bottom, we should introduce postal banking like a lot of over countries to get ourselves out of this reliance on those banks.
It's not about opening accounts, it's about monthly fees. If banks can't make money from debit card transactions they'll have to charge account holders directly.
That article itself points out why it doesn't necessarily apply today:
> Banks make money off consumers by a mix of payment revenue (typically interchange, wire fees etc), net interest margin (the spread between what banks earn lending money and what they pay as interest on your checking and savings accounts) and other fees (monthly fees, dormant account fees, overdraft fees etc). Over the last 2 decades, as interest rates have hovered at all time lows, the mix of revenue from depository consumer banking has shifted heavily to payment & fee based revenue, and less on net interest margin. In addition, if you were a bank customer that lived paycheck to paycheck (or otherwise had high income and expense volatility) then your bank couldn’t rely on net interest margin to monetize you anyway, and relied much more heavily on fees.
Interest rates are no longer at an all time low, so the shift in how banks make money is already underway. The article also mentions high infrastructure costs for banks ($36/year/account), but many banks (and especially credit unions) have had massive migrations over the last five years on to newer infrastructure.
If anything, this article makes it clear to me that there are a lot of systems in place here beyond just the interchange fee.
Paycheck to paycheck customers have low bank balances, so the interest rate doesn't matter because there's no principal. The banks could have them as customers because of debit card fees paying the costs. But they became unprofitable overnight when the Durbin amendment went into effect, which is why banks started to implement monthly fees (in addition to overdraft fees etc).
Yes, credit unions and neobanks can charge higher swipe fees so they can bank them. But under this new proposal, maybe not anymore.
Your link literally claims that small community banks have lobbys strong enough to escape the regulation, as if big banks had less lobbying power. Honestly it's not that often to see a blog post discrediting itself so quickly…
Also, since the interest rate has risen a lot since then, the main argument in it simply disappeared.
Government agencies should only be able to do what congress defines in law.
A great example is ATF abusing the power to redefine what a pistol/rifle/machine gun are multiple times in the past decade. This leads to people who were previously compliant with the law, with prior written approval from the ATF, now are not compliant with their new definition and could face prosecution. All without any new law being passed, all being done by political appointees and bureaucrats.
Government agencies exist because congress is lazy and writing good regulation on every topic under the sun is hard. Congress describes what they want to happen, get their brownie points either from constituents or from rich donors, and move on. Regulators are then left with the actual work of creating the rules and implementing the systems that carry out that will.
The amount and degree of interpretation they are allowed to do is obviously up for debate (and has been litigated thoroughly and repeatedly) but its really silly to say "just do what congress says" as if congress doesn't constantly defer its responsibility for creating regulations to the executive.
The US Constitution invested Congress with the power to write legislation. Congress chose to write legislation that created specific agencies, gave them broad power, and then outsourced fine-grained decision-making power to those agencies. At literally any point Congress wants, it can can revoke that power or adjust it.
Congress generally doesn't do this because it simply doesn't have the bandwidth, and so core government functions would become unscalable. But you can certainly vote for representatives who support this idea, and we could see how the results come out.
Congress delegated rulemaking authority to the executive branch in a number of areas and has the power to un-delegate it, but has chosen to not exercise that power. They don't, in part, because that would create a lot of work for Congress, which would interfere with Congress' ability to solicit and deliver on bribes.
Federal Reserve is not a government agency, and no government employees work for it. You can read their employee hiring and benefits and observe it does not follow government hiring process nor government civil service pension. They are a contractor to the government.
+1. especially when the redefinition aligns with a change in administration. there are countless normal rules/regulations that can pass but when it counts as a material/constructive new change, it should come from congress and be an actual law.
> a supreme court case about if the fed has the power to do this without a law
The Durbin Amendment specifically instructed the Fed to "limit fees charged to retailers for debit card processing" [1]. SCOTUS declined to review in 2015 [2]. I don't see anything on the docket challenging this precedent [3].
There's definitely some willing cooperation when Congress pawns off much of it's power to the administrative state, and dodging accountability is not the least among the reasons why (see the lack of single subject bills as another example). But agencies also just walk all over the boundary of the authority granted by Congress too, see West Virgina vs EPA:
I think the case is actually about forcing the fed to lower the rates because merchants think they are unfairly high, not whether they have the right to set the rates, which came from the Dodd-Frank Act.
In the Netherlands, debit card fees are 6 euro-cent per transaction and 0% of the transaction amount. Since debit card do not come with a loan/insurance/fraud protection/chargeback ability, there's only a fixed processing fee and no need to charge fees based on the transaction amount.
Eventually, but that will take time as the scaffolding needed works its way through financial services firms like ACI and FiServ, and POS terminals and mobile apps gain support. In the interim, the Fed can squeeze this drag with regulation.
Readit News
Maybe the card with the higher interchange fee is worth it for the charge dispute or whatever, but if you want that piece of mind, pay for it your damn self.
I think there's some additional complications that different cards charge different interchange fees and merchants don't find out what that fee is until well into the transaction, so maybe this is harder to do that I realize, but that'd be another spot for some good regulation to make the marketplace more transparent.
They can do this in almost all of the US, although a few states have limitations.
Here's a good list of states and what their restrictions are on charging more for credit cards: https://www.usatoday.com/money/blueprint/business/credit-car...
Cash also is not free to accept. The cost of handling it is quite significant. Time spent on counts, armored cars, change scams, etc., are all added costs.
You should actually love this because fees paid by the merchant are pure gravy for you as the customer. If they could charge more and get away with they should just do that. Externalizing the interchange costs would be a huge win for merchants because they just got free money while keeping the sticker price the same. All the benefit of hidden fees without the needing to hide it part, just like taxes. It would do nothing except make everything 2%ish more expensive for card users while you gain nothing. If you've ever wondered why companies push so hard against requiring display prices to include tax this is why. It's not the high cost of label printing, it's that they would just have to eat the 7% because they can't just hike prices without consumers reacting to it.
Have you never noticed that despite the fact that different retail outlets take wildly different cuts it never manifests in significant price differences? "Cut out the middleman and buy direct" is often the most expensive way to buy something.
Poor people only have debit cards, which have high fees.
Rich people use credit cards, which have low fees.
It would yet again be another situation where the poor pay more than the rich. Which is very often.
Deleted Comment
I would be happy as a small SaaS owner and consumer to see those percentage fees disapear. I never have more than 1% cash back on the 3% that CC take.
> Square’s processing fees are 2.65% per card present transaction, 2.9% + 30 cents per paid Square Invoice and Square Online sale, 3.4% + 15 cents per manually entered transaction and INTERAC debit cards are processed at 0.75% + $0.07 per tap or insert
Unsure if this is pushing new Interac costs to buyers or a profit grab. It was just 10 cents flat per swipe, so anything over $4 and you’re worse off.
https://kunle.app/feb-2022-children-of-durbin.html
I'm not really moved by "if we don't let the TBTF banks charge whatever they want, they might not like us". We have not-for-profit institutions and community-focused banks for a reason. At bottom, we should introduce postal banking like a lot of over countries to get ourselves out of this reliance on those banks.
Deleted Comment
Could say the rich subsidize the poor in USA (by keeping more in 0.0001% interest checking accounts and more card swipes per month).
> Banks make money off consumers by a mix of payment revenue (typically interchange, wire fees etc), net interest margin (the spread between what banks earn lending money and what they pay as interest on your checking and savings accounts) and other fees (monthly fees, dormant account fees, overdraft fees etc). Over the last 2 decades, as interest rates have hovered at all time lows, the mix of revenue from depository consumer banking has shifted heavily to payment & fee based revenue, and less on net interest margin. In addition, if you were a bank customer that lived paycheck to paycheck (or otherwise had high income and expense volatility) then your bank couldn’t rely on net interest margin to monetize you anyway, and relied much more heavily on fees.
Interest rates are no longer at an all time low, so the shift in how banks make money is already underway. The article also mentions high infrastructure costs for banks ($36/year/account), but many banks (and especially credit unions) have had massive migrations over the last five years on to newer infrastructure.
If anything, this article makes it clear to me that there are a lot of systems in place here beyond just the interchange fee.
Yes, credit unions and neobanks can charge higher swipe fees so they can bank them. But under this new proposal, maybe not anymore.
Also, since the interest rate has risen a lot since then, the main argument in it simply disappeared.
Deleted Comment
A great example is ATF abusing the power to redefine what a pistol/rifle/machine gun are multiple times in the past decade. This leads to people who were previously compliant with the law, with prior written approval from the ATF, now are not compliant with their new definition and could face prosecution. All without any new law being passed, all being done by political appointees and bureaucrats.
The amount and degree of interpretation they are allowed to do is obviously up for debate (and has been litigated thoroughly and repeatedly) but its really silly to say "just do what congress says" as if congress doesn't constantly defer its responsibility for creating regulations to the executive.
Congress generally doesn't do this because it simply doesn't have the bandwidth, and so core government functions would become unscalable. But you can certainly vote for representatives who support this idea, and we could see how the results come out.
The Durbin Amendment specifically instructed the Fed to "limit fees charged to retailers for debit card processing" [1]. SCOTUS declined to review in 2015 [2]. I don't see anything on the docket challenging this precedent [3].
[1] https://en.wikipedia.org/wiki/Durbin_amendment
[2] https://www.reuters.com/article/us-usa-court-debitcards-idUS...
[3] https://www.scotusblog.com/case-files/terms/ot2023/
https://www.supremecourt.gov/opinions/21pdf/20-1530_n758.pdf
https://www.axios.com/2023/07/22/fednow-instant-payments-cre...