Debit card swipe fees have been a major bone of contention between big banks and U.S. merchants since caps on the fees were instituted during the financial crisis. According to CNN Money, the average pre-recession swipe fee was forty cents, but during the recession the Federal Reserve capped fees at twenty-one cents in an effort to keep business operating as optimally as possible.
However, the twenty-one cent cap was still too high for the National Retail Federation, which filed a suit in federal court against the Federal Reserve in November of 2011. In a ruling that has been highly anticipated by both retailers and consumers, the court struck down the Fed’s maximum fee and suggested that it lower the swipe fee cap to twelve cents. It is unlikely that the central bank will contest the ruling, but the twelve-cent cap is still being debated.
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What remains somewhat murky, though, is whether or not the reduction in the swipe fee cap will result in lower costs for consumers. When swipe fees were initially reduced during the recession, the average costs of most goods remained stable or increased.
The major loser in this ruling, though, is undoubtedly the big banks, which can no longer charge merchants high fees for customers’ debit card purchases. When the swipe fee caps were introduced in 2011, many corporate financial institutions saw declines in revenue, a phenomena that many expect to be replicated when the swipe fee caps are reduced. It remains unclear whether or not the banking industry will take legal action against the swipe fees.