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The Battle Over Loose Change in America

UNS LIGER) 12ยข LIBLR) The Battle Over Loose Change in America Rep. Shelley Moore Capito, R-w.Va., introduced legislation March 16 to delay the proposed final rule on interchange fees, also known as "swipe fees," in order to allow a comprehensive study of how changes will affect consumers, small financial institutions and merchants. What do you mean my Ipad2 did not cost $599.99? Consumer Bank of America obtains funds from Consumer buys Ipad2 for $599.99 using a Bank of America visa debit card. bank holder account Bank of America charges Apple a 1.5% interchange fee ($8.99) and 0.1% Visa transaction fee (.59 cents) Merchant Bank charges Apple a 0.5% processing fee ($2.99) Card- Issuing Bank Merchant Merchant Bank Bank of America sends $590.41 to Apple's merchant account deposits $587.42 into Apple's business account $590.41 Apple sends card information to its merchant bank for verification and Merchant account processes payment with Bank of America %24 $599.99 payment processing Merchant Bank So at the end of the day, Apple receives $587.42 for what cost you the consumer $599.99. Free Market? While the credit card market in the United States continues to grow, exceeding $1.3 trillion annually, the number of card-issuing banks has shrunk. 80 percent of all consumer transactions occur on three cards -- Visa, Mastercard and American Express About 90 percent of all credit card accounts are issued by JPMorgan Chase, Citigroup, Bank of America, Capital One and HSBC. Interchange Fees The new rules are expected to become official in just six weeks and then go into effect in July 21, 2011. American households pay $230 each in annual interchange fees. 38 $1.45 $16 frillion billion Consumer debit card transactions in 2009 Retail value of 2009 debit card transactions Current Annual avg. fee per debit card transaction revenue from fees for banks More: http://www.foxbusiness.com/industries/2011/03/10/retailers-rally-swipe-fee-cuts/#ixzz1GW6gVHrs 2$ Determining the Best Cap for Interchange Fees cents per transaction. It also found the median network processing fees are four cents per-transaction. The NRF is trying to get the flat-fee down to the four-cent figure, but would like to see it even lower. "It should be less than that be- cause our studies show that even four cents is a little high," says Duncan. "Debit cards are like checks and checks cost zero." ith average interchange fees fees are hurting their businesses and W Currently at 44 CEnts, the 12- cent cap will cut these charges by up to 70% from 2009 levels. This would apply to issuers that, together with their affiliates, have assets of $10 billion or more. The Fed's proposed 12-cent cap would be a major vic- tory for merchants, who say higher ability to create jobs. To figure out the most agreeable rate, the Fed has considered opinions from groups like the NRF and has evalu- ated survey data, completed by merchant processors and financial organizations. One report found the median total processing cost for debit and prepaid card transactions is 11.9 Banks Will Simply Find Another Way to Charge Bank of America started a pilot program of new checking accounts and fee structures in Other fees States testing fee-based Non-Sufficient Fund (Overdraft) $35 MA Stop Payment item Return Deposit Domestic Wire Transfer (Outbound) Domestic Wire Transfer (Inbound) $30 checking accounts $35 three states this year. It plans to take the program national by the second half of 2011. AZ $25 GA $12 ATM and Debit Car Fees: Non-BofA ATM $2 Who stands to gain from the removal of interchange fees? can keep their interchange fees high and rake in rev- JOB GROWTH According to a SMALL BANKS The inter- Debit Card Transac- tions," if inter- MERCHANTS Merchants will now be able to pass savings onto customers; however, in reality wouldn't they just keep these profits for themselves? Imean this is capitalism. report by former U.S. change fees were change fee limits that will cost big banks bil- lions won't hit small institutions as hard. Small banks will be exempt from the new rules, meaning they Under Secretary of Commerce Robert J. Shap- iro, entitled: "The Costs of reduced to the cost of process- ing the transac- tions plus an av- erage profit level, the resulting increase in eco- nomic activity would generate nearly 242,000 jobs in the U.S. economy. enue. But small banks are still worried that retailers SALE 'Charging It' in America: Assessing the Economic might disallow the use of their cards if they do not slash inter- change fees. Impact of Inter- change Fees for Credit Card and SOURCES: http://money.cnn.com/2011/03/11/pf/debit_interchange_fees/index.htm http://money.cnn.com/2011/03/10/pf/debit_cards_limit/index.htm?lid%3EL http://www.walletpop.com/2010/03/04/interchange-fees-cost-you-more-than-you-realize/ http://www.csnews.com/top-story-report_interchange_fees_impede_economic_growth_job_creation-45002.html http://www.wtrf.com/story.cfm?func=viewstory&storyid=96031 http://www.foxbusiness.com/industries/2011/03/10/retailers-rally-swipe-fee-cuts/#ixzz1GW6gVHrs Created by TradingSim www.tradingsim.com $599.99 $599.99 $599.99 $587.42

The Battle Over Loose Change in America

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When you buy something with your credit card or debit card you actually pay for it more than the price on the tag. This infographic explains how banks make money charging you a few and how they have c...

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