Debit Card Limits

[Chernabog]

My understanding is that the banks were overcharging the places that took Mastercard/Visa, etc. on the debit cards to begin with. With the legislation, they'll still make huge profits, but not as huge as before.

How much does it actually cost for a transaction? A penny or less?

If forced to, I would rather pay a yearly fee than have a cap on my card. I almost never have more than $10 in my pocket (and usually, it's no cash at all in my pocket) But more likely, and as pain in the arse as it would be, I would stick my money in whatever bank or credit union DOESN'T charge the fee.

[Alex]

Originally Posted by Chernabog

My understanding is that the banks were overcharging the places that took Mastercard/Visa, etc. on the debit cards to begin with.

First, there's the more philosophical question of whether it is possible for one side to overcharge the other for a service when both parties freely enter into the deal. There is no law requiring Target to accept Mastercard network debit or credit cards if they feel the terms of too burdensome (and that reason is a big part of why, for years, CostCo only accepted Discover, ARCO doesn't accept credit cards at their pumps, and many government programs and fees don't accept plastic of any sort).

But that was certainly the position of merchants that they were being overcharged. WalMart, years ago, won a lawsuit against Visa and Mastercard claiming they were colluding to keep interchange rates high.

With the legislation, they'll still make huge profits, but not as huge as before.

And banks don't deny that. What they say is that with the profits they'll now be making it no longer supports the complete suite of products they have been offering for the last 15 years or so (we tend to forget just how recent the phenomenon of small scale POS card use is, remember when it seemed like technological excess that you could now buy your $2.99 value meal at McDonald's using a card?).

And again, the philosophical question of what is "too much" profit so long as it is legally obtained.

How much does it actually cost for a transaction? A penny or less?

Probably less, in terms of the infrastructure. Probably more due to fraud losses and other secondary concerns. If you're capped at $0.12 per swipe, $0.11 of which is profit you have to have 909 fraud free swipes to counteract one dillweed who steals his ex-girlfriends debit card and buys $100 of booze.

I almost never have more than $10 in my pocket (and usually, it's no cash at all in my pocket)

And why don't you carry cash? You likely did 20 years ago. Because the fee structure created an environment that subsidized the creation of a system that allows you to use plastic almost everywhere you might want to spend money.

But more likely, and as pain in the arse as it would be, I would stick my money in whatever bank or credit union DOESN'T charge the fee.

Personally, I doubt you'll see caps like those mentioned in the article (though you already have caps, most people just never run into them). Or if you do they'll be risk based caps or transferrence of risk (difficult to do due to regulation but does it make sense that the bank has all of the fraud risk if you leave tell your online boyfriend what your card numbers are so he can buy a ticket to visit you) from the bank to the consumer, all of which will still make

But the real key here is that Congress has not told banks "You can only make X% profit when one of your customers uses a piece of plastic to make a purchase." Instead they've said "You can only make X% profit when one of your customers uses a piece of plastic to make a purchase and the word Debit appears on it; you can still make all the profit you want off of them if they use a nearly identical piece of plastic but it says Credit on it."

Even the laziest of capitalists will respond to that by saying "oh, well then I'd really prefer that my customers use the credit card." And in reality, for someone who can handle their money, if caps really were imposed that would be the way to avoid it. Use a credit card everywhere you currently use a debit card and then go home at the end of the day/week/month and pay it off in full.