Credit and Debit Card Ratings

Retailers Celebrate Swipe Fee Ruling – Federal Reserve Caps Swipe Fees

By Shane Tripcony

It has been an issue of contention for a long time. The so-called swipe, or interchange, fees that retailers are charged every time a customer makes a purchase using a debit card have long been a boon for banks and the bane of retailers who have to pay them.

Most recently, thanks to the Dodd-Frank law that passed in 2010, the Federal Reserve put a cap on those fees at 21 cents per transaction. Although banks screamed that the cap would cost them billions in lost revenue – and force them to eliminate perks and awards programs – retailers were never overly thrilled with the ruling, either, arguing that the fee was still artificially high.

According to a report in Bloomberg, U.S. District Judge Richard Leon in Washington ruled on July 31 that the Federal Reserve considered information it shouldn’t have in arriving at its cap of 21 cents. Additionally, Bloomberg reporter Tom Schoenberg writes that Leon’s ruling determined that the Fed did not sufficiently foster competition among the card networks that levy the fees. “The board’s final rule not only fails to carry out Congress’s intention; it effectively countermands it!” wrote Leon in his ruling.

Although the current swipe fee cap will remain in effect, the ruling means that Fed regulators will have to go back to the drawing board and come up with either a new or an interim ruling. Not surprisingly, the reaction to the ruling was split, with retailers cheering the decision and banks claiming it will do harm to banks and their customers. “The price controls enacted as a result of the Durbin Amendment served one purpose – further lining the pockets of our nation’s big-box retailers at their own customers’ expense,” Bloomberg quoted Frank Keating, the president of the American Bankers Association as saying. “It was – and still is – all about trying to help retailers increase profit margins while providing no real benefit to consumers.” By contrast, the National Retail Federation released a statement saying that the “decision is the first step in setting these initial wrongs right and will ensure that swipe fee reform is done correctly.” Although nothing concrete has been announced yet, it’s unlikely that the ruling will not be appealed.

Author: Shane Tripcony

  • Retailers Celebrate Swipe Fee Ruling – Federal Reserve Caps Swipe Fees

    Retailers Celebrate Swipe Fee Ruling – Federal Reserve Caps Swipe Fees

    By Shane Tripcony

    It has been an issue of contention for a long time. The so-called swipe, or interchange, fees that retailers are charged every time a customer makes a purchase using a debit card have long been a boon for banks and the bane of retailers who have to pay them.

    Most recently, thanks to the Dodd-Frank law that passed in 2010, the Federal Reserve put a cap on those fees at 21 cents per transaction. Although banks screamed that the cap would cost them billions in lost revenue – and force them to eliminate perks and awards programs – retailers were never overly thrilled with the ruling, either, arguing that the fee was still artificially high.

    According to a report in Bloomberg, U.S. District Judge Richard Leon in Washington ruled on July 31 that the Federal Reserve considered information it shouldn’t have in arriving at its cap of 21 cents. Additionally, Bloomberg reporter Tom Schoenberg writes that Leon’s ruling determined that the Fed did not sufficiently foster competition among the card networks that levy the fees. “The board’s final rule not only fails to carry out Congress’s intention; it effectively countermands it!” wrote Leon in his ruling.

    Although the current swipe fee cap will remain in effect, the ruling means that Fed regulators will have to go back to the drawing board and come up with either a new or an interim ruling. Not surprisingly, the reaction to the ruling was split, with retailers cheering the decision and banks claiming it will do harm to banks and their customers. “The price controls enacted as a result of the Durbin Amendment served one purpose – further lining the pockets of our nation’s big-box retailers at their own customers’ expense,” Bloomberg quoted Frank Keating, the president of the American Bankers Association as saying. “It was – and still is – all about trying to help retailers increase profit margins while providing no real benefit to consumers.” By contrast, the National Retail Federation released a statement saying that the “decision is the first step in setting these initial wrongs right and will ensure that swipe fee reform is done correctly.” Although nothing concrete has been announced yet, it’s unlikely that the ruling will not be appealed.

  • A Card Level View Of The Economy Indicates Consumer Confidence On Upswing

    A Card Level View Of The Economy Indicates Consumer Confidence On Upswing

    It’s safe to say that we all have economic indicators that we like to examine in order to gauge the health of the overall economy.

    By Shane Tripcony

    For professional economists and academics, of course, there are reams of data about arcane sounding things like durable goods orders that help them determine whether the economy in the U.S. is healthy or ailing. For regular folks, though, the way to divine whether the American economic picture is brightening or darkening is through more subtle observations, like whether or not a favorite restaurant is bustling or the presence (or absence) of “for lease” signs along main street.

    But given the prevalence and use of credit cards in the U.S. economy, another solid indicator is the spending habits Americans have with their plastic. And that’s just what the quarterly Chase Freedom Lifestyle Index reports by tracking and sharing exactly how users of the Chase Freedom credit card truly spend their money. Chase, which is the consumer and commercial banking unit of JP Morgan Chase & Company, insists that this is a better way to measure overall consumer trends – and hence, the all-important mood of the consumers who power the U.S. economy – than more speculative opinion polls and surveys.

    The most recent version of the Chase Freedom Lifestyle Index, which measures spending from the second quarter of 2013, indicates that consumer confidence is on the upswing, albeit ever so slightly. Indeed, the index reports that year-over-year spending ticked up one percent from the second quarter of 2012 compared to the same time period this year. But once you dig down a bit more into the data, individual sectors of the economy seem to be doing both much better and worse than that general measure.

    For instance, spending on things like sporting goods and museums both rose by seven percent year-over-year, along with lessons and classes and books, which rose by six percent and eight percent, respectively. Most striking was a 14 percent rise in spending in the costume retail category, which seems to point to a busy prom and wedding season. Still, not all categories saw increased spending. Spending on gas slumped by seven percent from 2012 to 2013, as did the amount of money shelled out for consumer electronics.

    Even though no individual reading of the direction and strengths of the economy is complete by itself, this latest data dump by Chase adds to a growing body of evidence that the economy is moving (however slowly) in the right direction.

Credit and Debit Card Ratings