A court threw out the cap on debit card swipe fees. Nothing changes yet, but here’s where I’d watch your checking account.
Your Daily Dad Joke
What’s Forrest Gump’s password?
1Forrest1.
Who pays for the swipe
Every time you pay with your debit card, a little money changes hands that you never see. The store pays a fee, and most of it goes to the bank that gave you the card. A few cents a swipe. Nobody thinks about it at the register.
That’s why I wanted to pass this along.
You may have seen news this week that a federal appeals court threw out the Federal Reserve’s cap on those debit swipe fees. The court said the Fed let the banks count costs the law doesn’t allow, and sent the rule back for the Fed to write again.
Your first question might be: does this change anything for me?
Not yet. The court’s ruling doesn’t take effect until the court sends its formal order. By my count of the court’s rules, that’s mid-December at the earliest. Later if anyone asks for a rehearing. Today the cap is 21 cents plus a sliver of the purchase, and it covers banks with $10 billion or more in assets. Nobody knows yet what the new number will be.
Each side says you come out ahead if it wins. The stores’ coalition says a new rate “takes some of the upward pressure off the prices shoppers pay every day.” A credit union group says the costs of a secure transaction “do not disappear because a court limits which ones may be reflected.” Both are telling you their side of a fight between stores and banks.
So here’s where I’d look, because this has happened once before. After these fees were first capped in 2011, a Federal Reserve staff study found that the banks under the cap made checking cost more, with fewer free accounts, higher monthly fees and higher minimum balances. A Richmond Fed survey of stores estimated that 77.2% didn’t change their prices at all, 21.6% raised them, and 1.2% lowered them.
That doesn’t mean it will happen again. It’s just where I’d keep an eye.
And some of you will remember that fall. Bank of America announced a $5 monthly fee to use your debit card, then dropped it about a month later after customers pushed back. People had more say than they thought.
Here’s the one thing I’d do this week. If your checking account is free, find out what keeps it free. Is it a direct deposit, a minimum balance, a number of debit purchases a month? It’s usually on the bank’s fee schedule or in the app. Then if a “change in terms” letter shows up from your bank, open it instead of tossing it. The bank has to send that notice at least 30 days before a change that adds a fee or otherwise works against you, so you’ll have time to decide.
Anyway, I wanted you to hear about it before any letter shows up. It’s a fight between stores and banks, and you’re the one holding the card.
If your bank started charging you for checking, would you pay the fee or move your account? Share it in the comments so we can all learn from it. I read every comment.
You don’t have to follow a court fight to stay ahead of it. Knowing what keeps your account free is enough, and it’s five minutes this week.
— Steve
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Damon Day’s math on a 10-stop Walmart Spark delivery, after miles and tips
A longer video from me: Costco or Amazon Prime: Is Either Worth It If Money’s Tight? I do the break-even math on both memberships with you, and show which one I’d cancel first if one has to go.
SEE A SCAM? SAY SOMETHING. If one has landed on you or someone you love, tell me at tips@getoutofdebt.org. The ones that can warn other people may show up here. Leave out account numbers and passwords.
If any of this was new to you, somebody you know hasn’t heard it either. It’s free at yourmoneyactually.com, and I don’t sell the list. The places I actually use for my own money, and what I get out of telling you, are on one page where they’ll always be.
This is what I’m telling friends like you over coffee. But remember, you do you.