In one of the most absurd pieces of legislation I’ve seen, the government is trying to regulate how much money banks are allowed to charge for providing a service. The Durbin Amendment, which was signed into law last year and will go into effect on July 21, would limit debit card interchange fees to a maximum of $0.12 per swipe.
Even though retailers are voluntarily deciding to do business with banks that issue Visa and Mastercard debit cards, the government (specifically Dick Durbin) feels the need to get involved and start setting rules and price limits.
The Durbin Amendment Effect
The law hasn’t even been implemented, and we’ve already seen debit card rewards programs disappear and we’ve heard rumors of banks setting maximum purchase limits on debit cards. We can only expect to see more of this if the law does go into effect in a few months.
This law also makes debit card processing so cost prohibitive that banks can’t afford to allow large purchases on debit cards, thus making buying anything above $50 or $100 impossible on a debit card.
Thankfully, some congressmen have realized this is probably a horrible idea, and have introduced legislation to try to delay the implementation one or two years while they take a closer look at how it will affect not only consumers, but also small community banks and credit unions.
I personally never use my debit card, so my budget isn’t going to be affected by this law. However, I’m so angry that our government would pass a law that provides absolutely zero benefit to the consumer.
Can someone out there please help me find something good about this law? Thanks dudes.
Kevin McKee is an entrepreneur, IT guru, and personal finance leader. In addition to his writing, Kevin is the head of IT at Buildingstars, Co-Founder of Padmission, and organizer of Laravel STL. He is also the creator of www.contributetoopensource.com. When he’s not working, Kevin enjoys podcasting about movies and spending time with his wife and four children.
Completely ridiculous in my mind! At least for me. I live for the rewards of using my credit and/or debit cards! I can track everything better, because I can see my budget on Mint.com like every 5 seconds if I want. Grrrrrrr. This makes me grouchy for sure.
Just to clarify, the credit card rewards are not going to go away. This only applies to debit cards. It doesn’t affect me personally, but I’m still pissed off about it because it’s such a dumb idea.
i mostly use my debit card, so this would suck for me.
Thankfully, I use credit cards for all my purchases. I feel like writing a letter stating “Dear Government, get out of my life, thank you.”
I say great and if yopu want to earn your rewards then let it it come out of your own bank account or let the bank pay for it. This idiot in this video didnt explain all the horrors of debit fees that merchants are charged atn nthe gas pumps. i own a store and sold 17,000 dollars with pay at the pumps last week and went in the hole 65 dollars because of bank fees from debit cards. its a shame when the bank makes 10 cent a gallon on gas from credit and debit fees and my 3 cent a gallon profit is ate up by debit fees. I have to pay $1800.00 dollars a year to the state of North carolina for under ground tanks and the state still tacks 53 cent a gallon tax on the cost. This bimbo in this video has NO EDUCATION in the store business and what it takes to suceed because all he cares about is his sorry butt and his stupid rewards. Well, NEWS FLASH!!!!!!!!!! I shouldnt have to work harder to pay for your rewards and make no profit at selling gas. If you think so then go screw yourself retard moron. Way to go Durbin for having an education and knowing the facts.
If you can’t make money selling gas to people who want to use credit cards, then stop accepting credit cards. Or stop owning a gas station.
Hmmm, well…… Nope can’t find nothing. Whatever government. I personally use my debit card because I don’t have a credit card. And even if I did, I would still keep using my debit card because I like my mint piecharts. It makes it easier.
another beautiful screw job for the people, courtesy of dick durbin – the ‘senior’ statesmen among the crooked and incredibly bold scum democrats of illinois! i have a chase checking account with a debit card that accrues substantial rewards, and those rewards will now be lost thanks to this!! these rewards have been one of the few times I felt the bank was giving us something of value back, in return for our multiple accounts with them – now I will return to the non stop take take take from the bank while I carefully manage our finances to keep from getting screwed by one fee or another from the bank. durbin is such a tool!!! i live in illinois, and this guy is the very picture of a climber politician that throws the people in his state under the bus to achieve personal gain and position in his party – one excellent example is that when the obama administration asked senators if their state would accept guantanamo bay jihadist prisoners in their state, only one guy stood up and said ‘sure i’ll take them in my state and put our citizens at risk’ and that was dick durbin who made a deal with the senate leadership to place him at the second to top position for dems in the senate if he agreed to put the people of illinois as the bullseye target on the muslim extremist’s map of where to begin suicide bombing and killing of the ‘infidels’ that put their jihadist brothers on trial for their acts!!!!!!!!!!!!!!!!!!!! the people of illinois are the template for socialist’s that want to take our country entirely under the federal govt’s control and auspices – they continually vote for the democrats because they have been screwed by them for so long they literally think they have no other choice but to hope for a handout and keep electing crooked democrats. don’t let this happen to your state, or country!! the daley machine in chicago is the most corrupt, fraudulent, incompetent, lying, cheating scum organization in the usa – but they’ve been in there for 50 years and the people can’t see any way out of it now. if the socialists can export this garbage to the entire country, we will be the next truly socialist country with no way to compete in business with the rest of the non socialist world and the people will have given away their basic rights and freedoms in exchange for the very meager handouts the elitists at the top choose to give them.
“Some people argue that retailers will pass savings along to customers, but if they really wanted to pass along savings, they could have been offering a cash discount all along. I’ve only heard of that at a few gas stations, so in general I don’t believe the retailers are going to jump at the chance to pass along the savings.”
Visa and Mastercard specifically prohibit all merchants that accept their debit or credit cards from offering cash discounts.
This is a common misconception. If this were true, then those gas stations offering a cash discount wouldn’t exist.
The agreements merchants sign with Visa and Mastercard state that the businesses cannot charge a service fee for customers using cards. However, it says nothing about offering cash discounts.
A merchant can’t increase the price of an item because a card is used, but it can discount a price because a card is not used.
They do it all the time at the truck stops. Different prices for credit and cash. But you consumers still bitch about it. As long as the stinking greedy banks steal from the merchants, the merchants are going to jack up the prices along with inflation. I wish they would make everyone use cash.
Interesting, I’ve heard of the prohibited cash discount thing too but I know of a chain store here that offers discounts for cash & debit purchases, so how do they do it?
As for the price control, while this sort of thing sounds nice in theory, the unseen consequences can come back to bite. If in the end the consumer is less satisfied with their debit card, then who really benefited from the regulation?
Again, discounts are perfectly compliant with Visa and Mastercard. It is charging a premium for customers using the card that is against the terms of service.
I think this is a crock of sh*t! I use my debit card ALL THE TIME so that I get my miles from United. If this really happens, I’m going to sign up for a United credit card so that I can still earn miles. Seriously, a huge steaming pile of sh*t!
This story is missing a few major points.
Visa and Mastercard have a duopoly. There is no competition on the rates they charge. They are tacitly agreeing as competing companies to keep prices high. Furthermore Visa and Mastercard are not competing for retailers to accept their cards. They are competing for banks to issue their cards. This means whomever can offer the most money to the bank wins. This translates into higher fees to accept the cards for retailers and the card companies compete for the business of issuing banks. While I disagree with the method (the duopoly should be broken by anti-trust law) fixing the price of debit processing is one way to bring some fairness back. The actual cost to run the transactions is way smaller than what Visa and Mastercard charge the retailer.
Only certain retailers were allowed to offer discounts if you paid with something other than cash. This was a rule imposed by Visa and Mastercard. Most retailers would have their processing abilities revoked as they would be in violation of their merchant agreement. Retailers did not have the choice to discount until this legislation passed.
Retailers do not have a choice about which payment types they can accept. Not accepting credit cards will hurt many businesses. This puts the Visa/MC duopoly in a major controlling position and they have and will continue to abuse their powers until they are broken up.
Your rewards are paid for by retailers. Why should retailers pay for you to fly somewhere if you buy something at their shop? That doesn’t make any sense. This falls back to the card issuers. They want you to to use their cards so they compete by giving back some of the grossly overpriced processing fees retailers pay.
Of course they have a choice whether to accept credit cards or not. No one is forcing anyone to accept them. The fact that retailers were willing to pay interchange fees means they were priced appropriately. That’s the point of a free market.
If they kept raising their fees to the point where retailers stopped accepting credit cards, that’s when prices have become too high; not when some politician decides it is too high.