Cap on swipe fees may not benefit consumers

The Federal Reserve recently released the last rules of a bill Congress passed last year that caps credit card swipe fees at 21 cents per transaction - up from an initially proposed 11 cents. The fee is slated to begin on October 1. For small businesses that have lost capital for years due to swipe fees, the cap comes as a victory. In the past, if a consumer purchased a small-ticket item, such as a 99-cent soda at a convenience store and paid with a credit or debit card, a small retailer paid 44 cents on the transaction and could go into the negatives for the purchase, Slate noted. While the move may be a victory for small firms, it may be a hindrance for consumers. Prior to the ruling, banks were charging up to 44 cents per swipe, making up to $16 billion per year off such transactions. The source reported that banks have already guaranteed they will make up the $16 billion loss by slashing free checking, charging for online banking and debit cards, reducing rewards programs and instituting other fees. According to USA Today, the number of banks offering free checking has drastically decreased since 2009. Last year, 65 percent of the country's biggest banks offered checking without a monthly fee - down from 76 percent the year before. This figure is expected to continually decrease in upcoming months. Additionally, service fees are on the incline. Bank of America will start charging consumers $5 for lost debit cards this fall and U.S. Bank will charge consumers an annual fee of $30 for individual retirement accounts by the end of this month, up from $10. However, those customers with a balance of $25,000 will be exempt from that charge. "Other banks are charging fees for everything from paper statements to talking to a customer service rep," Sandra Block reported for USA Today. "Some will charge a fee for closing your account within six months of opening it." For those consumers who bank with small, local banks, there may be a silver lining. The ruling exempts these banks and small credit unions, indicating that not all firms will find it necessary to hike their fees. Some representatives told USA Today that this won't matter, however, and they too must make up the difference by raising fees.