Fed gratuitously doubles $Bs in swipe fee profits

[boutons_deux]

A Stunning Development in the Swipe Fee Debate

The average swipe fee in America is 44 cents, the highest [2] rate in the world. In December, the Federal Reserve released an analysis saying that banks could still make profit by charging 12 cents per transaction, and under the Dodd-Frank financial reform, planned to enforce this cap starting today.

Yesterday, less than 24 hours before their rules were to go into effect, the Federal Reserve announced [6] it would cap the fees at as high as 24 cents, not 12.

http://www.thenation.com/print/blog/161760/stunning-development-swipe-fee-debate

[Winehole23]

Poor, poor banks. How can they be expected to make any money if we don't let them continue to ripoff depositors?

[Wild Cobra]

Typical libtard thinking.

They want to cut the fee to $0.12 from the $0.44. Now, you are saying they are increasing the profits, when the $0.12 was never effective, but will still be cut to $0.24 maximum...

Sorry, but $0.24 is still a cut of $0.20 from the original $0.44.

Did you fail math in school?

[ElNono]

And we bailed these fuckers out?

smh

[Spurminator]

Typical libtard thinking.

They want to cut the fee to $0.12 from the $0.44. Now, you are saying they are increasing the profits, when the $0.12 was never effective, but will still be cut to $0.24 maximum...

Sorry, but $0.24 is still a cut of $0.20 from the original $0.44.

Did you fail math in school?

Hell, so is $0.43. We should have just capped it at $0.43! Cutting it to $0.24 is socialism!

[ElNono]

Typical libtard thinking.

They want to cut the fee to $0.12 from the $0.44. Now, you are saying they are increasing the profits, when the $0.12 was never effective, but will still be cut to $0.24 maximum...

Sorry, but $0.24 is still a cut of $0.20 from the original $0.44.

Did you fail math in school?

So, instead of cutting it by $0.32, as originally planned, they get a bonus of $0.12... the math was always right.

[ElNono]

If it didn't need capping it, it wouldn't have been part of the legislation. The whole point of the cap is to substantially reduce what banks make from those caps.

[Wild Cobra]

Hell, so is $0.43. We should have just capped it at $0.43! Cutting it to $0.24 is socialism!
WTF?

Do you know what is on the table here?

It appears you guys don't.

[Winehole23]

What's on the table, maestro?

[Spurminator]

John Lennon would have never stood for this.

[Agloco]

So is that going to be passed on to me in the form of lower costs at Best Buy or Wal Mart?

How do I go about getting my 24 cents per swipe back?

[admiralsnackbar]

Typical libtard thinking.

They want to cut the fee to $0.12 from the $0.44. Now, you are saying they are increasing the profits, when the $0.12 was never effective, but will still be cut to $0.24 maximum...

Sorry, but $0.24 is still a cut of $0.20 from the original $0.44.

Did you fail math in school?

Try reading the article for a change instead of running your mouth like an ignoramus, WC. The banks make up their losses on debit card deregulation. Final analysis: no change.

Moving on... I guess I didn't pay enough attention in civics: how the fuck does the Fed have the authority to override the Senate?

[Wild Cobra]

If it didn't need capping it, it wouldn't have been part of the legislation. The whole point of the cap is to substantially reduce what banks make from those caps.
The $0.44 average is what the banks charge retailers per transaction. Capping it at $0.24 per transaction is a substantial loss in revenue to the banks.

[ElNono]

The $0.44 average is what the banks charge retailers per transaction. Capping it at $0.24 per transaction is a substantial loss in revenue to the banks.

Which is the point of the cap, substantially reduce that fee as a revenue source for the banks. That money has to come from somewhere. Normally it comes from retailers who pass it to consumers. THAT is the point of capping it.

Banks effectively are shifting an extra $0.12 per transaction to the consumer.

[Wild Cobra]

Try reading the article for a change instead of running your mouth like an ignoramus, WC. The banks make up their losses on debit card deregulation. Final analysis: no change.

Moving on... I guess I didn't pay enough attention in civics: how the fuck does the Fed have the authority to override the Senate?
I think you should read it again.

I didn't see where is said debit cards are deregulated. It said the cap of $0.24 is above the average $0.23 for debit cards. The author said "basically freeing all debit card transactions from regulation." I read it just that they aren't being capped at the original intent of $0.12. The $0.12 would be almost a 50% cut from average. The $0.24 is effectively no cut. No where does it say they are being deregulated. Read the wording carefully.

[Wild Cobra]

Which is the point of the cap, substantially reduce that fee as a revenue source for the banks. That money has to come from somewhere. Normally it comes from retailers who pass it to consumers. THAT is the point of capping it.

Banks effectively are shifting an extra $0.12 per transaction to the consumer.No Shit and Bull shit.

The $0.44 is already being cost shifted to the consumer. They are not shifting an extra $0.12 to the consumer, the consumer is just not saving as much as intended. The consumer is already effectively paying the $0.44.

It is still cheaper to the retailer, which can if he chooses, passes it on to the consumer.

if anyone makes money of this, it's the retailers.

[Wild Cobra]

Poor, poor banks. How can they be expected to make any money if we don't let them continue to ripoff depositors?
This is a fee charged to retailers for their credit card swipe machines.

[ElNono]

No Shit and Bull shit.
The $0.44 is already being cost shifted to the consumer. They are not shifting an extra $0.12 to the consumer, the consumer is just not saving as much as intended. The consumer is already effectively paying the $0.44.
It is still cheaper to the retailer, which can if he chooses, passes it on to the consumer.
if anyone makes money of this, it's the retailers.

It's not that complicated brainiac. If the banks are racking it in, then it's not getting back to the consumers. At least if it goes back to the retailers, there's the actual possibility that the consumers catch a break.

The fact of the matter is that the actual cost to the bank is $0.08 per transaction. Meaning that the proposed $0.12 per transaction already included a 70% profit margin. A $0.24 fee is a 300% profit margin for the bank. (the old $0.44 was a 550% profit margin).

Who has those margins in today's economy?

[Wild Cobra]

It's not that complicated brainiac. If the banks are racking it in, then it's not getting back to the consumers. At least if it goes back to the retailers, there's the actual possibility that the consumers catch a break.

The fact of the matter is that the actual cost to the bank is $0.08 per transaction. Meaning that the proposed $0.12 per transaction already included a 70% profit margin. A $0.24 fee is a 300% profit margin for the bank. (the old $0.44 was a 550% profit margin).

Who has those margins in today's economy?
I know all that. The cost shifting is already being done. The $0.24 is still a reduction. I have been responding to the OP title, "Fed gratuitously doubles $Bs in swipe fee profits." I did misunderstand your intent of the cost shifting in your previous post, because you said "extra" which implies more. The $0.24 is still less than the $0.44.

[Winehole23]

This is a fee charged to retailers for their credit card swipe machines.The hair you split makes sense. :tu

[ElNono]

I know all that. The cost shifting is already being done. The $0.24 is still a reduction. I have been responding to the OP title, "Fed gratuitously doubles $Bs in swipe fee profits." I did misunderstand your intent of the cost shifting in your previous post, because you said "extra" which implies more. The $0.24 is still less than the $0.44.

Yeah, which is more than the $0.12 that the Fed analyzed was more than sufficient for the banks to turn a profit on the fees (I actually think 70% is already more than generous).

[ElNono]

BTW, make that 21 cents, not 24 cents...

http://www.creditcards.com/credit-card-news/debit-card-interchange-swipe-fee-cap-21-cents-1282.php

[admiralsnackbar]

I think you should read it again.

I didn't see where is said debit cards are deregulated. It said the cap of $0.24 is above the average $0.23 for debit cards. The author said "basically freeing all debit card transactions from regulation." I read it just that they aren't being capped at the original intent of $0.12. The $0.12 would be almost a 50% cut from average. The $0.24 is effectively no cut. No where does it say they are being deregulated. Read the wording carefully.

Touché -- I do seem to have misinterpreted those passages. Hypocrisy is a bitch! :lol

[boutons_deux]

"The $0.12 would be almost a 50% cut from average"

$0.12 is still 70% margin.

[belindaB]

The Fed had tentatively said it would cap interchange fees at 12 cents per transaction, but insiders are saying that the fees could be set as high as 24 cents per transaction. The cap on the debit and credit card transaction fees is a portion of the Dodd-Frank Act, the financial reform laws that were passed in 2010. The card fee cap was mandated by the Durbin amendment to the Dodd-Frank Act, which will take effect on July 21.

[Wild Cobra]

"The $0.12 would be almost a 50% cut from average"

$0.12 is still 70% margin.
Except that is disputed, and why they changed the cap. The dispute claims there are other factors involved that those figures don't consider. Hence, the revised number to 24 cents.

[boutons_deux]

"why they changed the cap."

they changed the cap to hand free $Bs to banks, period.

[ElNono]

Except that is disputed, and why they changed the cap. The dispute claims there are other factors involved that those figures don't consider. Hence, the revised number to 24 cents.

21 cents (http://www.creditcards.com/credit-card-news/debit-card-interchange-swipe-fee-cap-21-cents-1282.php)

[LnGrrrR]

I'm not really sure that we needed a cap on something like swipes. To individual users, 12 cents doesn't really add up, but it does for a bank. I don't necessarily see why we need to set a hard cap. *shrug*

Not a fan of banks, but I don't think allowing 44c swipes causes a great deal of financial stress. Could be wrong of course.

[belindaB]

The Federal Reserve is just about to broadcast a limit on interchange fees. The fees are billed to stores by financial institutions when people use their debit or charge cards. The Fed was legislatively required to cap the fees by this July, though the limit might be greater than the initial estimates given by the central financial institution. But it turned out on the contrary. Swipe fee cap by Federal Reserve may be higher than planned (http://personalmoneystore.com/moneyblog/2011/06/28/swipe-fee-cap-federal-reserve/). Due to the massive loss of revenues, consumers can expect that many former perks of banking will either disappear or come with far more conditions. Faced with a drop in revenue that the banking industry is used to, the consumer is the party who will end up feeling the pinch.

[ElNono]

I'm not really sure that we needed a cap on something like swipes. To individual users, 12 cents doesn't really add up, but it does for a bank. I don't necessarily see why we need to set a hard cap. *shrug*

Not a fan of banks, but I don't think allowing 44c swipes causes a great deal of financial stress. Could be wrong of course.

It does add up. They racked in $2b in those fees last year alone. For sake of argument, let's say the fee would have been half that, that's $1b extra dollars for retailers and (potentially) consumers. Might not be a lot for each person individually, but retailers could use that money to, for example, offer more loss leaders. Which eventually benefit the consumers.

[ElNono]

The Federal Reserve is just about to broadcast a limit on interchange fees. The fees are billed to stores by financial institutions when people use their debit or charge cards. The Fed was legislatively required to cap the fees by this July, though the limit might be greater than the initial estimates given by the central financial institution. But it turned out on the contrary. Swipe fee cap by Federal Reserve may be higher than planned (http://personalmoneystore.com/moneyblog/2011/06/28/swipe-fee-cap-federal-reserve/). Due to the massive loss of revenues, consumers can expect that many former perks of banking will either disappear or come with far more conditions. Faced with a drop in revenue that the banking industry is used to, the consumer is the party who will end up feeling the pinch.

:wow
from the article you linked:

It only costs banks about a penny to make the transaction. The banking industry is estimated to take in more than $1 billion per month from swipe fees.

That said, that's the number claimed by the Merchant's attorney. I believe the Fed analysis estimated 8 cents a transaction. The actual value is probably somewhere in between.

[InRareForm]

Credit Unions will take a hit.

[DMX7]

Capping it at $0.24 per transaction is a substantial loss in revenue to the banks.

But not for the retailers.

[baseline bum]

Let the banks charge whatever they want for the swipe fee. Just add it to each person's total at the grocery store. That way I don't have to subsidize people who use the cards when I pay cash and whoever uses the cards for the convenience, extra miles, etc. can pay the cost for that service upfront. Make the costs transparent and if it's worth it, people will still use it.

[TDMVPDPOY]

lol down here its 50cents per eftos/atm transaction, then you have $5 per month account keeping fees...how fkn lame...

the 4 banks down here is in the top10 banks worldwide that has posted a profit this year...fkn lame continue to take consumers for a ride

[Winehole23]

Five years ago, Congress decided to take action on the bloated, price-fixed fees that banks charge merchants every time a customer makes a purchase with a debit card. It ordered the Federal Reserve to bring competition to the market by lowering fees to a reasonable sum.


Unfortunately, the Fed was swayed by heavy bank lobbying as it wrote the rules to implement the new law, settling on language that allows Visa and MasterCard to keep fees that are way too high (http://www.americanbanker.com/bankthink/how-fed-policy-on-swipe-fees-quashes-market-forces-1073317-1.html). Now, according to a Richmond Fed study (https://www.richmondfed.org/publications/research/economic_quarterly/2014/q3/wang) released in August, only 10% of 420 retailers surveyed reported that their fees had dropped two years after the law went into effect in October 2011. The other 90% saw no change, were uncertain of the impact or actually faced higher fees.


This clearly goes against congressional intent. The survey offers proof that the Fed made a mistake in appeasing big banks and credit card companies.


In fact, even the least efficient banks are making a 500% profit on the fees they charge merchants to process debit card transactions, according to figures the banks report to the Fed and analyzed (http://www.merchantadvisorygroup.org/stay-informed/mag-insights/2015/01/22/the-merchant-advisory-group-releases-white-paper-on-debit-card-costs) by the Merchant Advisory Group, a trade association. Our own analysis of the numbers banks report shows thatabout 90% of banks impacted by the rule (the 100 or so with more than $10 billion in assets) areactually making twice that profit margin. By contrast, retailing is among the least profitable industries as merchants struggle (http://pages.stern.nyu.edu/%7Eadamodar/New_Home_Page/datafile/margin.html) to make margins of 1% to 3%.


Moreover, these are just the margins on the rates regulated by the Fed. Most banks aren’t covered by the regulations — and credit cards aren’t covered at all. So, the real profit margins from so-called swipe fees are actually many times higher than 1,000%.

http://www.americanbanker.com/bankthink/how-the-fed-failed-the-us-on-swipe-fees-1076433-1.html

[Winehole23]

Nowhere else in our free-market system do such uncompetitive practices flourish. The results are clear: American merchants pay seven or eight times (http://www.bbc.com/news/world-europe-31812810) the two- or three-tenths of a percent that European merchants pay in debit and credit card swipe fees. That's because the European Union has vigorously enforced its antitrust laws.


Swipe fees have become second-largest operating cost (http://www.nacsonline.com/Research/FactSheets/IndustryIssues/Pages/CreditCardFeesaGrowingChallengeforConvenienceStore s.aspx) for many merchants, ranking after labor costs but more than rent and utilities. And the fees go up faster than any other cost merchants face.

[boutons_deux]

swipe fees and checking overdraft fees amt to just about ALL bank profits

[Winehole23]

damn socialists, picking on credit card companies:


Tougher credit-card rules have helped eliminate at least $16 billion in hidden or unexpected fees charged to consumers, lowering the total cost of borrowing while encouraging healthy growth of the industry, according to a new government report.http://www.wsj.com/articles/credit-card-rules-have-cut-16-billion-in-fees-report-1449118860

[Winehole23]

Visa and Mastercard and a number of US banks to pay $6.2 Billion to settle antitrust charges:


The antitrust case began in 2005, when about 12 million merchants filed Sherman Act claims in the Eastern District against Visa, Mastercard and their issuing banks, arguing that rules set by card issuers’ networks that impose artificially inflated fees violated the act.


The merchants claimed the credit card companies were being anti-competitive by imposing the “default interchange fee” that applies to every transaction in the network; the “honor-all-cards” rule that requires all stores to accept all Visa and Mastercards if they accept any of them; and “anti-steering” rules prohibiting merchants from charging different prices depending on the means of payment.
https://www.law.com/newyorklawjournal/2018/09/18/visa-mastercard-agree-to-pay-6-2b-to-merchants-in-settlement-of-antitrust-litigation/

[Winehole23]

I guess $6.2B is no longer an impressive number, even though it's certain the con was bigger than that.

[ElNono]

I guess $6.2B is no longer an impressive number, even though it's certain the con was bigger than that.

Apparently, still needs to be approved by the court. What I don't get is why the anti-trust case doesn't continue if there was evidence of potential cartel behavior. Basically, I can understand the companies could settle with the merchants, but why doesn't the federal government picks up the glove and looks into the case and presses further. Well, I suppose I get why.

[Winehole23]

it's bad for business for the government to punish ripping us off

[ElNono]

it's bad for business for the government to punish ripping us off

badmouthing our corporate overlords makes you a commie. Don't be a commie.

[Winehole23]

The United States now has some of the highest credit card processing costs in the world, typically at 2 percent to 2.25 percent of every purchase. This is eight to nine times as much as the prevailing swipe fee in the European Union. The vast majority of merchants pass (https://www.kansascityfed.org/Research%20Working%20Papers/documents/7595/rwp20-18.pdf) these costs on to consumers by charging more for their products — regardless of how one pays.
https://www.nytimes.com/2023/03/04/opinion/credit-card-rewards-points-poor-interchange-fees.html