Federal Reserve proposes decreasing debit card swipe fees

Debit card swipe fees overview: 

• Who: The Federal Reserve is proposing a decrease in debit card swipe fees.
• Why: Data collected by the agency shows that debit card transaction processing costs have lowered by nearly 50% from 2009 to 2021.
• Where: The Federal Reserve is located in Washington, D.C.

The Federal Reserve is proposing to lower the allowed debit card transaction fees that banks can charge.

The agency said that debit card swipe fees can be lowered because the cost to banks for an average transaction went from 7.7 cents in 2009 to 3.9 cents in 2021.

The maximum permissible fee for a $50 debit card transaction would be 17.7 cents under the proposal, down from 24.5 cents under the current rule, according to a memo sent to the Federal Reserve’s Governing Board.

Under the proposal, the base allowable fee would drop from 21.0 cents to 14.4 cents with a 0.04% transaction fee and 1.3 cents for fraud prevention.

“By directly linking the interchange fee cap to data from the Board’s biennial survey of covered issuers, this approach should ensure that, to the extent practicable, the interchange fee standards will be effective going forward for assessing whether, for a debit card transaction subject to those standards, the amount of any interchange fee received by a debit card issuer is reasonable and proportional to the cost incurred by the issuer with respect to the transaction,” the debit card swipe fee memo says. “Similarly, this approach should ensure that, going forward, the fraud-prevention adjustment reflects changes in the fraud-prevention costs incurred by covered issuers.”

Fees will cover the costs for most debit card issuers but covering all costs on all transaction isn’t reasonable, Federal Reserve says

The new rule should allow most issuers on most transactions to cover their costs but the Federal Reserve said that having the outlying higher cost transactions always covered would not be reasonable.

The rule would go into effect 60 days after the final rule was posted in the Federal Register. There will be a 90-day public comment period after the proposed rule is posted in the Federal Register.

A bipartisan bill this summer to help reduce credit card swipe fees for restaurants was introduced in the House and Senate.

Are you concerned about the debit card swipe fees you are charged on transactions? Let us know in the comments.

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