Watch out for upcoming debit card changes

by Denise Fesel
U.S. Army Garrison Kaiserslautern, Financial Readiness Program manager

Every time you swipe your debit card, the bank charges the merchant a fee for processing — one cause for the rising costs of purchasing goods in recent years.
Now, some banks are changing terms for debit cards — in reaction to Congress recently passing the Durbin Amendment, a law that impacts debit cards.

The amendment, part of last year’s Dodd-Frank Act, caps debit card “swipe fees” to help merchants, who have said they are powerless to negotiate rates with payment networks like MasterCard and Visa. The Federal Reserve Board is still deciding what the cap will be. Its expected implementation was Thursday.

Until implemented, no one will really know the law’s true effect — on customers or banks. But some banks already changed fee structures and rewards programs.
On-post banks overseas don’t have any plans to change current terms, said Capt. Chris Wurst, 266th Financial Management Center, the U.S. Army Europe Banking and Credit Union liaison officer.

Meanwhile, companies like JP Morgan are projecting huge revenue losses that could exceed $1.3 billion annually. To prepare for this economic turn, JP Morgan is no longer offering rewards programs and has started implementing a $59 annual fee for high risk creditors on newly issued cards. Financial institutions are trying to delay the law’s implementation.

Banks lobbied against the proposal, because it generated revenue — roughly $16 billion in revenue in 2009, according to the Federal Reserve.

Retailers say they will be able to offer price breaks for every time you swipe your card to buy things like gas or groceries. But, banks warn this will only be crumbs, as they will be forced to make up for the loss.

Store owners have offered more than 11,000 comments to the Federal Reserve. Retailers pay an estimated $18 billion annually in interchange fees, a drastic increase over the past decade.

The savings is not guaranteed to the consumer because the retailer is the one that would pass these savings on and many are silent on what they will do with the reduction of the cost.

Unfortunately, the amendment also doesn’t offer clear details on how the law will be implemented nor does the law require retailers to cut prices. However, banks have said fee hikes will make up for any lost income.

Now is a good time to take note of important notices from your financial institutions or credit card companies and review the changes in terms. This is a great way to stay informed.

If you have any questions, or want to sign up for financial readiness workshops, call Army Community Service, Financial Readiness Program at 493-4151 or 0631-3406-4151.