How much is your debit card worth to you? For banks, it’s worth 44 cents every time you swipe it. For retailers, it’s worth no more than 12 cents.
That may not seem like much for a piece of plastic with an embedded magnetic stripe but think of all that little card does. You need a tank of gas? Slide your card. Some groceries? Just enter your PIN. Out of change for the parking meter? Whip out the card instead.
Convenience comes with a cost. The Federal Reserve on Wednesday is expected to decide what that cost should be. Putting aside the fundamental issue of a government agency picking market prices, the debit card fee is worth billions of dollars to banks. Don’t expect banks to give up that money. They will go looking elsewhere for it.
Debit card swipe fees bring in an estimated $15 billion a year. That money is paid by retailers to banks for the ability, convenience and security of allowing customers to pay with debit.
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If the Federal Reserve caps what banks can charge retailers for accepting debit cards, expect the free lunch banks have provided customers for years to come with a cost.
The days of free checking accounts, free debit cards and no-fee credit cards for bank customers could be numbered at many institutions. The cost of convenience has to be paid by someone.
Tom Hudson, anchor of “Nightly Business Report,” produced by NBR Worldwide and distributed nationally by PBS, can be followed on Twitter at HudsonNBR.