Consumers have been burdened with high fees in relation to their debit cards for years. Go to an ATM, fees are incurred. What are worse are the fees accrued if someone receives money from a non-network ATM. The fees can be as much as $5 per transaction. The value of you money slowly diminishes.
Along with several other financial measures enacted, the Federal Reserve passed the financial reform bill. Some of the highlights from the bill include credit/debit card fee restructure as well as overdraft fee protection.
The credit/debit card fee restructure includes a reduction in fees, an oversight bureau, and higher penalties.
Affect on Merchants
The biggest affect will be on the merchants. Expect merchants to pay interchange fees of 2%. In the course of a year’s time 2% will equate to millions of dollars in lost profit. Due to the small monetary purchases consumers make with their credit/debit cards, merchants such as Visa and MasterCard were feeling the effects. With the new law, the fees will be aligned with the purchase amounts. According to Credit Suisse bank analyst Moshe Orenbuch, the fees could be lowered by as much as 30%.
In relation to the consumer, merchants do not have to pass along their saving. The consumer will eventually see more discounts for paying with cash or check.
Effect of consumers
The consumer will feel the brunt of the new laws enacted by the Federal Reserve. The upside is the discounts offered by the financial institutions such as Visa and MasterCard. The minimum for credit/debit card purchases will be $10.
Under the new regulations, the consumer will have a bureau within the Federal Reserve watching over predatory financial institutions. Financial products such as payday loan operations, mortgages, and credit/debit cards will be regulated.
According to the new regulations, banks will no longer be able to charge overdraft fees unless a consumer requests overdraft protection from their financial institution.
In the long run, the third-parties assigned will see the most loss. Companies such as Bank of America stand to lose over $2 billion on fees alone. As a result, banks so called rewards programs will be minimal to non-existent.
With the new Federal Reserve laws to take effect, the consumers will see the biggest gains due to decreased fees. To recuperate the financial lose, banks and merchants will attempt to add additional fees.