Prepaid Debit Card Reviews, Complaints, Etc

Tag: fees

  • Get Financially Fit by Avoiding Rising Overdraft and ATM Fees

    Get Financially Fit by Avoiding Rising Overdraft and ATM Fees

    Have you ever made a $20 purchase with a debit card and ended up shelling out $50 because you forgot you didn’t have enough money in your account? If you did have to fork over an additional $30 to pay that dreaded overdraft fee, you’re actually a little bit fortunate. That’s because a new study by Bankrate.com pegs the average overdraft fee at $32.74, a new high as well as the 16th consecutive year the study has found an uptick in the penalty consumers must pay for sending their account into the red. Which all points to the need to avoid overdraft fees in order to remain financially fit.

    As part of its 17th annual Bankrate Checking Survey, the personal finance website surveyed the 10 largest banks and thrifts in 25 of the country’s largest markets. The survey found that overdraft fees also have geographic distinctions. At $34.80, Philadelphia had the highest, while San Francisco had an average fee of $26.74.

    Over the summer the Consumer Financial Protection Bureau (CFPB) put overdraft fees in its cross hairs, noting that the median debit card purchase is just $24. When an overdraft fee of $32.74 kicks in – which consumers typically pay within a few days – the CFPB noted that it amounted to a short-term loan with an interest rate of over 17,000 percent.

    There are ways to avoid overdraft fees. One is to simply decline overdraft protection, which has the effect of disallowing any purchase you don’t have the funds to cover. Another is to sign-up for email or text alerts that make you aware when your account has dwindling funds. Still another is to use prepaid debit cards, which only allow you to spend the amount of money you’ve pre-loaded into the account. While some prepaid debit cards have overdraft protection, it’s wise to decline it.

    The Bankrate survey had more grim news for the users of debit cards. The trend line for ATM fees is similar to that of overdraft charges, with the average cost of using an out-of-network machine reaching a new high of $4.35 per transaction. This charge includes both the fee consumers pay to the owner of the ATM as well as the amount they must pay their own bank for going out of network. As is the case with overdraft fees, location matters. In Phoenix, the average ATM fees were $4.96, while Cincinnati was the lowest at $3.75.

    There was some positive news in the study. This year marked the end of a steady decline in the number of free checking accounts available to consumers. In 2009, 76 percent of non-interest checking accounts did not charge a fee, a number that steadily declined to 39 percent by 2013. This year, though, the percentage seemed to stabilize at 38 percent.

     

     

  • Wal-Mart Sues Visa

    Wal-Mart Sues Visa

    Call it clash of the titans. On March 28th Wal-Mart Stores, the largest retailer in the world, filed suit against Visa, alleging that the credit card company had cost it $5 billion. At issue for Wal-Mart is its charge that Visa conspired with other banks to artificially elevate the so-called “swipe fee” charged to process every credit or debit card transaction. Wal-Mart is seeking a total of $15 billion in damages.

     

    Wal-Mart’s lawsuit, which was filed in the US District Court of Western Arkansas, is just the latest chapter in what has been a bitter and protracted feud between two sides who heavily depend on one another. Just a week before Wal-Mart filed its lawsuit, retailers were handed a defeat when the US Appeals Court for the District of Columbia overturned an earlier court decision that required the Federal Reserve to recalculate and lower its 21-cent per transaction cap on swipe fees. The ruling meant that swipe fees would continue to have a 21-cent ceiling.

    The ongoing battle over how much banks should be able to charge stores for processing a debit card purchase began after the 2010 passage of the Dodd-Frank Consumer Protection and Wall Street Reform Act. Under the Durbin Amendment of that legislation, the Federal Reserve was tasked with formulating regulations that would result in swipe fees that reflected the actual costs to banks of processing a payment. Initially, the Federal Reserve proposed a cap of 12 cents, though it later revised it upwards to 21 cents. Before the passage of the Durbin Amendment and the Federal Reserve’s calculations the average debit card swipe fee was about 45 cents.

     

     

     

     

     

     

     

     

     

     

     

  • Retailers Lose In Latest Debit Card Swipe Fee Ruling

    Retailers Lose In Latest Debit Card Swipe Fee Ruling

    Few consumers know that there is a heated battle going on about the fees charged every time you swipe your debit card. It’s a conflict between big banks and large retailers, two politically influential and well-moneyed groups, about the current cap on debit card swipe fees. The latest round of this years-long battle was a victory for the banks.

    On March 21 the US Appeals Court for the District of Columbia overturned a lower court’s July decision that ordered the Federal Reserve to recalculate and lower its 21-cent per transaction cap on the fees charged for processing a debit card payment. Retailers cheered that decision and expressed optimism that the so-called debit card swipe fee would be reduced to as low as 12 cents. This latest ruling means that the swipe fee cap will remain at 21 cents per transaction.

    The imbroglio over how much banks should be able to charge stores for processing a debit card purchase began after the 2010 passage of the Dodd-Frank Consumer Protection and Wall Street Reform Act. Under the Durbin Amendment of that legislation, the Federal Reserve was tasked with formulating regulations that would result in swipe fees that reflected the actual costs to banks of processing a payment. Initially, the Federal Reserve proposed a cap of 12 cents, though it later revised it upwards to 21 cents. Before the passage of the Durbin Amendment and the Federal Reserve’s calculations the average debit card swipe fee was about 45 cents.

    Seeking to lower the cap even more, the National Retail Federation (NRF) and other groups filed an appeal in federal court in 2011, which eventually resulted in last summer’s ruling. Naturally, the NRF was disappointed in the court’s latest ruling. “The Fed ignored congressional intent and worked to shield debit card companies and big banks. A self-described victory for the banks usually results in higher costs for consumers,” says Mallory Duncan, NRF’s senior vice president and general counsel. NRF and its allies are considering whether to appeal this latest ruling.

    By contrast, the American Bankers Association applauded the ruling but remained critical of the establishment of a swipe fee cap in the first place. “While this decision is a welcomed outcome, the fact remains that the underlying policy – the Durbin Amendment – has not accomplished its goal of lowering prices for consumers. It has only served to increase the bottom line for big box retailers,” says ABA president Frank Keating. This is a battle that seems likely to continue.

    Prepaid Debit Card Fees Lower Than Checking Account Charges

    A recent report by Bretton Woods, Inc. shows that most consumers using prepaid debit cards to manage finances do so for less than $7.50 per month. by Chris Warren It has long been an assumption that users of prepaid debit cards turn to them as something of a last resort. But a …

     

     

     

     

     

  • The Battle Over Swipe Fees

    The Battle Over Swipe Fees

    When the so-called Dodd-Frank law passed in 2010, one of its measures was pretty easy to quantify. A sprawling, complicated and controversial piece of legislation aimed at taming the most egregious of abuses perpetrated by the financial services industry in the years before the 2008 financial collapse, Dodd-Frank also addressed the amount of money debit card issuers could charge retailers when a customer made a purchase with plastic. The Federal Reserve was tasked with deciding what the cap should be and eventually settled on a number just below 25 cents per transaction. Estimates on the impact of the ceiling on that fee– known as a swipe fee because it’s a charge that gets racked up when a retailer swipes a card – on banks and card processors come to around $8 billion annually, a hefty chunk of change.

    According to a recent report from Bloomberg News, banks and payment networks are working hard in state capitals around the country in an effort to prevent restaurant and clothing storeowners from charging their clients more to pay their tabs with credit cards than they do for debit card and cash transactions. According to the Bloomberg story, written by reporter Carter Dougherty, banks and their allies have already been successful in banning surcharges on credit card purchases in Utah, and around 20 other states are also considering bills related to swipe fees.

    In a nutshell, what the legislative initiatives in Utah and other states is aimed at doing is preventing retailers from urging – particularly through the use of surcharges – their customers from opting for cash or debit cards over credit. At issue, of course, is money. Banks and card processors are eager to keep as many customers as possible in the habit of using their credit cards when they buy a meal or an iPod; according to the Bloomberg report, card issuers earn between 1 and 3 percent of a transaction whenever someone uses their Visa, MasterCard or American Express card.

    Not surprisingly, retailers want to see swipe fees associated with credit cards as low as possible, contending that they are already too much of an unfair cash cow for banks. “I view the banks and credit-card companies as unwanted business partners. They do not work anywhere near as hard as I do, yet they collect nearly as much in fees as the average restaurant earns in profit,” wrote Ted Burke, the co-owner of the Shadowbrook Restaurant in Capitola, California, in the San Francisco Chronicle. “Business owners like me can negotiate virtually all of our costs, but we are powerless to negotiate swipe fees.” If banks and card processors are successful on the state level, many retailers also won’t be able to encourage customers to opt for lower fee debit cards. Under federal law, business a credit card transaction can cost a consumer more than a debit or cash purchase.

  • Community Banks Aren’t Hurt By Debit Card Fees

    Community Banks Aren’t Hurt By Debit Card Fees

    A provision in the Dodd-Frank Act originally had community banks worried.  The new regulation would reduce the amount of money that larger banks could charge for debit card swipes by half.  Targeting banks with assets of more than $10 billion, this meant smaller, community banks would be exempt from the regulation.

    According to a recent article in Albuquerque Business First by Dennis Domrzalski, smaller banks, feared that the companies responsible for collecting the money from the swipes would not be able to establish the two-tier system necessary that would allow them to be able to identify the cards from smaller banks from those of larger banks.

    The law took effect in October 2011.  In 2012, the average interchange fee received by small banks was 43 cents per swipe, about the same as before the law took effect, the Fed said in a report on interchange fees.  “In 2012, exempt issuers (small banks) received $7.4 billion in total debit card interchange revenue, compared with approximately $5.3 billion in debit card interchange revenue in 2009,” the study said.

    For more information, visit:  http://www.bizjournals.com/albuquerque/blog/morning-edition/2013/05/debit-card-fees-arent-hurting.html

Prepaid Debit Card Reviews, Complaints, Etc