Next time you’re torn between “Debit or credit?” let the potential surcharge make up your mind. Some retailers charge a fee to customers who use credit cards because the banks issuing the cards charge retailers more for the swipe. Naturally, this practice among retailers dissuades customers from using credit cards, which is precisely why the issuing banks are asking state lawmakers to make it stop.
Unlike debit card swipe fees, which were capped at around 24 cents by the Dodd-Frank Financial Reform Act 0f 2010, credit card swipe fees have no such caps. This means banks are free to charge more to retailers every time customers swipe their credit cards at check-out. Evidently, it’s the risk associated with banks extending credit that enabled them to talk their way out of Dodd-Frank imposing fee limits on credit card swipes.
As a result of all this, retailers are left paying the price for consumers’ use of credit cards. And while consumers may not choose debit simply out of the goodness of our hearts to help retailers avoid higher fees, if said fees are passed on to us, debit it is! Ideally, credit card debt should be used as a tool to strengthen credit scores and, in turn, save us money, not cost what could add up to hundreds of dollars in swipe fees over the course of a year.
Of course, banks are none too happy about this, as they rely on credit card swipe fees for $40 billion in revenue every year. So, it’s no big surprise they’re lobbying state legislators to pass laws banning retailers from charging more for credit card swipes. As reported by Bloomberg News, Utah is the only state to have passed such a law, though New Jersey is said to be considering the same, and as many as 20 other states have payment card-related legislation pending.