Retailer Responds to Fed's Ruling on Debit Card Fees

Alabama retailer Rahim Budhwani applauds Federal Reserve's ruling on debit card fees.

January 04, 2011

BIRMINGHAM, Ala. - When Congress approved the financial services reform bill last summer, it directed the Federal Reserve to issue rules to ensure that debit swipe fees are reasonable and proportional to the processing costs incurred. Visa and MasterCard currently charge debit swipe fees of around 1 percent to 2 percent of the transaction amount €" among the highest rates in the industrialized world.

On December 16, the Fed issued its proposed rule on debit card fees. NACS Board member Rahim Budhwani, CEO of 6040 LLC, applauded the Federal Reserve€™s recent ruling on debit card fees and the impact this decision will have on small businesses in a letter to the editor that appeared in the Birmingham News:

"As a small business owner, I applaud the Federal Reserve's recent decision to place price limits on debit card swipe fees. Left unregulated, these fees allowed banks to charge merchants an average of 44 cents per debit card transaction €" an outrageous, unnecessary cost that robbed small businesses at a time we could scarcely afford it. The new limit of 12 cents per transaction will do much to help small merchants like myself stay financially solvent.

"These new rules have been a long time coming. For businesses that do many debit transactions in one day, high swipe fees have often been the difference between profit and loss, since most small businesses only clear 1 to 2 percent in profit. The big credit card companies and banks, meanwhile, raked in profits of more than $40 billion annually from these fees.

"When costs go down, that's good for everyone. For customers, it means lower prices at their favorite retail stores. For small merchants, it means real savings that will positively affect our ability to grow, hire new people and stay competitive.

"Every small business, and every person who shops at small businesses, ought to give thanks to the Fed for its smart, bold ruling on swipe fees €" and hope its final rule goes even further in cutting these hidden fees."

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