Get All Access for $5/mo

Debit-Card Swipe Charges -- Will They Be Slashed? High swipe fees have been the bane of merchants in recent years, as costs soared. We got swipe-fee relief on credit cards earlier this year, but debit-card fees remained high.

By Carol Tice Edited by Dan Bova

Opinions expressed by Entrepreneur contributors are their own.

High swipe fees have been the bane of merchants in recent years, as costs soared. We got swipe-fee relief on credit cards earlier this year, but debit-card fees remained high.

Now, the Federal Reserve has proposed major cuts in debit swipe fees -- up to 90 percent. Banks are howling and will lobby hard for a reprieve, but real relief for retailers may be on its way. The Fed proposes cuts of up to 90 percent, much more than many on Wall Street expected. New rules are expected to finalize in April and take effect in July 2011.



Rather than the current debit-swipe system, in which card companies can charge up to 2 percent of the purchase price, the Fed says debit-card swipe fees should be capped at 12 cents per transaction. Period.

That's a big difference -- for instance, a retailer would pay just 12 cents on a $100 purchase, instead of the current fee of around $1.50.

Some people still aren't satisfied with this proposal -- the National Retail Federation says it will continue to press for zero fees. Their logic: Debit cards are essentially just plastic checks, and paper checks aren't charged a fee.

The NRF has a point there, but it's doubtful this dream could come true. Banks and credit-card providers need to make something to cover administration of their debit-card programs. And we do usually pay a small fee to order those paper checks, while banks issue debit cards free.

But the Fed proposal would still drop a lot of cash to many retailers' bottom lines, potentially enabling them to hire more, market more, and accelerate their business growth. We'll see if these deep cuts come to pass -- the Fed is taking comments from the public now. Expect financial-services firms to lobby hard against this one.

What do you think -- is the Fed's proposal enough, or should debit fees be eliminated? Leave your opinion in the comments.

Carol Tice

Owner of Make a Living Writing

Longtime Seattle business writer Carol Tice has written for Entrepreneur, Forbes, Delta Sky and many more. She writes the award-winning Make a Living Writing blog. Her new ebook for Oberlo is Crowdfunding for Entrepreneurs.

Want to be an Entrepreneur Leadership Network contributor? Apply now to join.

Editor's Pick

Business Solutions

Increase Productivity with This Microsoft 365 Subscription, Now $25 Off

It can make the entrepreneur life a lot easier.

Business News

Apple Pay Later Is Ending. Here's What's Taking Its Place.

The program was available for less than a year.

Leadership

This Artist Answered a Businessman's 'Powerful' Question — Then His Work Became 'the Poster Child for Juneteenth': 'Your Network Really Becomes Your Net Worth'

Reginald Adams was the executive director of a Houston-based art museum for more than a decade before he decided to launch his own public art and design firm.

Leadership

Harvard Business School Professor Says 65% of Startups Fail for One Reason. Here's How to Avoid It.

Team alignment isn't nice to have -- it's critical for running a successful business.

Business News

Here's What Companies Are Open and Closed on Juneteenth 2024

Since it became a holiday in 2021, Juneteenth has been recognized by some major corporations as a paid day off.

Growing a Business

I Hit $100 Million in Annual Revenue by Being More Transparent — Here Are the 3 Strategies That Helped Me Succeed

Three road-tested ways to be more transparent and build relationships that can transform your business — without leaving you feeling nightmarishly over-exposed.