All Articles Tagged "debit cards"
What New Debit Card Rules Mean for You
(Daily Finance) — Banks received some long-awaited news last week: theFederal Reserve voted to cap feescharged to retailers on debit card transactions at roughly 24 cents per transaction, down from an average of 44 cents. Financial institutions had feared the Fed’s initial proposal of a 12 cent cap would go through, which would have been a buzz cut — a 73% revenue loss in what trade groups estimate amounts to a $20.5 billion a year income stream for banks. The Fed also delayed implementation of the new rule until October, yet another sign of the long, heavily lobbied debate.
Fed Limits Debit Card Fees
(New York Times) — Fees paid by retailers to banks for debit card purchases, a $20 billion annual expense that has been the subject of a furious political battle over the last year, will be cut in half after the Federal Reserve voted Wednesday to cap the charges. The cap was mandated last year in the Dodd-Frank financial regulation law, but the Fed action was far less draconian than bankers had feared. The new cap of 21 to 24 cents a transaction, down from an average of 44 cents before the law passed, is roughly double the 12 cents tentatively proposed by the Fed last December. Consumers are unlikely to see any immediate change at the register because they do not pay the fees directly. But merchants have complained that as the cost of debit fees — a charge for processing payments — has risen in recent years, they have had to add it to the prices they charge.
How ATM Skimming Scams Work
(Chicago Tribune) — On the last Sunday in May, federal agents watched as two men dropped off a third near a Citibank branch across the street from Our Lady of the Resurrection Medical Center in Portage Park. At the bank, the man installed a device on an entrance door that, when patrons swiped their card to enter, recorded their account data. Inside the vestibule, he installed keypads that fit atop the existing pads on three ATMs to capture the PINs customers entered, according to a court filing. Federal authorities allege the three men were part of an Eastern European ring operating in Illinois, New York, California and Florida that has stolen at least $1.5 million. Charges filed under seal in New York allege one member stole almost $550,000 and compromised 639 bank accounts over three months. While a major case involving craft retailer Michaels drew attention to ATM skimming last month, the crime is not new. A Tribune review of federal charging documents filed in Chicago since 2009 shows the range in how such schemes work, from restaurant servers or store clerks getting paid to skim customers’ credit cards to more sophisticated work by overseas groups.
Banks Lose Fight on Swipe Fees
(The New York Times and The Associated Press) — The Senate on Wednesday refused to delay new rules that would sharply cut fees that banks charge retailers to process debit-card transactions. The rules were a major part of the Dodd-Frank financial-regulation law passed last year. The Senate vote was one of the strongest challenges to the new law. While 54 senators voted for the delay, the measure failed to garner the 60 votes required for it to pass under Senate rules. Forty-five senators, including Washington Democrats Patty Murray and Maria Cantwell, voted against the delay. Still, the vote represented a remarkable, come-from-behind lobbying campaign by banks to recover from the anti-Wall Street drubbing they took during debate over financial regulation. The debit-card bill, sponsored by Sen. package Durbin, D-Ill., passed last year by a 2-to-1 ratio after little debate and no hearings.
Bank Fees for Child Support and Unemployment Payments?
(Wall Street Journal) — Instead of paper checks, Oregon officials pay weekly unemployment benefits by loading the money onto debit cards that come with several unusual fees. After she found a job last year, 48-year-old Jennifer Schmidt of Riddle, Ore., was charged an “inactivity fee” of $2 by U.S. Bancorp for not using her debit card once she stopped drawing unemployment. The $2 fee sank the balance on her card into the red, triggering an overdraft fee of $17. ”How is it possible that the bigwigs in government can’t get a better deal for us?” she says. More than 40 U.S. states use prepaid debit cards to funnel unemployment benefits, child-support payments and other funds to recipients. Getting rid of paper checks and postage is hard to resist for cash-strapped governments, which last year steered $53.2 billion in unemployment benefits and child-support payments to prepaid debit cards, up 33% from 2009, according to Mercator Advisory Group Inc., a research firm in Maynard, Mass. Such cards made up 32% of the overall prepaid debit-card market in 2010. Banks are barreling into the business, led by J.P. Morgan Chase & Co., the second-biggest U.S. bank in assets, which has contracts with 21 states. U.S. Bancorp, based in Minneapolis, has contracts with 16 U.S. states. The nation’s largest bank by assets, Bank of America Corp., has deals in five states and will start issuing debit cards for California’s unemployment benefits in July.
Senators Hold up Debit Card Changes
(New York Times) — A bipartisan group of senators introduced a bill on Tuesday that would delay a new federal regulation to lower the swipe fees that banks could charge merchants for processing debit card transactions. Although there is growing uneasiness with the regulation, it is not at all clear the senators will succeed in upending the law, which easily passed the Senate last year and was a cause championed by a leading Democrat. The latest bill, introduced Tuesday by nine senators led by Senator Jon Tester, a Democrat from Montana, calls for a two-year delay and a one-year study during that period of the effect of the proposed limits on debit fees. The Dodd-Frank financial regulation bill, which became law last summer, directed the Federal Reserve Bank todetermine the limits in April and put them into effect in July. The proposed rules have faced complaints and heavy lobbying from banks, credit unions and credit card companies, which say that cutting and capping fees mean that the fees will fail to cover the cost of processing the transactions and accounting for fraud.
Banks Consider New Debit Card Fees
(Wall Street Journal) — Some large U.S. banks are considering allowing debit cards to bounce just like checks. Normally, if a debit transaction is approved, payment is guaranteed, since debit cards don’t bounce. But now banks are faced with new rules that will restrict how much they can charge merchants for debit transactions, erasing billions of dollars in revenue. To make back some of that money, banks are weighing whether to divide debit-card services into components and charging for them separately-known as “unbundling.” For example, if merchants want a guarantee of payment, as approved debit transactions currently offer, that would cost extra.
Unbundling would deal a blow to retailers who won a significant victory with the enactment of debit-transaction fee limits. Merchants pay debit transaction fees. While details on how unbundling may be implemented are yet to be worked out, merchants would pay a fee for the guaranteed payment feature if it is enforced. It isn’t clear if consumers will pay a penalty fee—similar to that on a returned check—for a debit transaction that bounces. In December, the Federal Reserve proposed as part of an overhaul mandated by the Dodd-Frank law capping debt-transaction fees for large banks at 12 cents, down from an average of 44 cents. A Fed representative declined to comment.
The Rise of Prepaid Cards
(Network Journal) — The trend of pre-paid credit cards targeted toward African-American consumers seems to be on the rise and made all the more alluring through alignment with notable personalities to the demographic such as lifestyle mogul Russell Simmons and radio personality Tom Joyner. Financial institutions seem to identify the Black segment as one of large opportunity due to recent statistics released by the Federal Deposit Insurance Corporation which states that 25% of all U.S. households are unbanked or underbanked. Of the households surveyed, 7.7 percent were unbanked, which translates nationally to 9 million households – approximately 17 million adults. An additional 17.9 percent – or 21 million households nationally (approximately 43 million adults) – were found to be underbanked.
Debit Cards for the Unemployed
(Network Journal) — Like many out-of-work Americans, Philip Tressler gets his unemployment benefits deposited directly into his checking account. He could have received the benefits via a debit card that the state also offers. But Tressler, who was laid off 14 months ago after 32 years working for a grocery store in western Pennsylvania, didn’t go for the card. ”It’s just not convenient,” he said, especially since he doesn’t use the same bank that issues the state’s debit card.
Uncle Sam Follows the Kardashians into Prepaid Card Market
(Washington Post) — Uncle Sam wants you to have a prepaid card, and he’s not the only one.¶ The Treasury Department is sending letters to 600,000 people this week encouraging them to sign up to receive their tax return on a new government-issued prepaid card as part of a pilot program to help those with limited access to bank accounts. ¶ On the other end of the spectrum, reality TV star Kim Kardashian’s namesake prepaid card failed just weeks after its launch. She and her sisters were shamed into bowing out because the card was riddled with high fees. ¶ Can these really be the same products?
