Senate plan may cap debit swipe fees

A credit card is swiped through machine at a Chicago toy store.

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Kai Ryssdal: Cause and effect is a tricky thing to prove when you're talking about the whole stock market. There's only rarely a single reason that the major indices move one way or the other. So today's declines on Wall Street were probably part worries over the European debt crisis, part relief over better-than-expected retail sales and part, just plain political.

The Senate is debating a financial reform bill, as you know. Last night they passed an amendment to limit credit card fees. The fees that get paid when you pay with plastic. The business taking your card pays a fee to the bank that issues the card. And the credit card company, say it's Visa, gets a few cents, too. They're called interchange fees. They're worth hundreds of millions of dollars to the banks, and they cost businesses a bundle, too.

Jeff Horwich reports that last night's vote could mean big changes are, yes, they're in the cards.


JEFF HORWICH: So you're in the checkout line, and you're offered a choice: Do you want to pay more for your groceries or less? Depends on how you decide to pay.

Jeff Lenard with the National Association of Convenience Stores says that could be the future of shopping.

JEFF LENARD: This bill would allow retailers to say, this card costs me more, but this card costs me less, let's pass on the savings.

In theory, that means debit and credit cards could start competing to charge merchants the lowest fees. The amendment also lets the Federal Reserve decide what a reasonable interchange fee is -- for debit cards. That could mean the end of sweet deals like this one...

COMMERCIAL: A Citadel debit card earns reward points that combine with your Citadel Platinum MasterCard points.

Rewards programs on all kinds of plastic could be a casualty. That's what happened when Australia went down this road in 2003.

The changes could mean big losses for credit card companies and banks, who collect billions from the fees. Shares of Visa and MasterCard plunged on the news. Then again, markets are a little jumpy these days.

JARET SIEBERG: The immediate impact is not going to be the dire response that some had feared.

Jaret Sieberg is a financial services policy analyst with Concept Capital. To him, the notion that 1 or 2 percent fees will change consumer behavior and reshape the credit and debit economy is far-fetched. The real danger for the banks is if Congress hands the Federal Reserve control to set credit card interchange fees as well. Seems unlikely now, but then again no one saw the debit card thing coming.

SIEBERG: When you're in such an anti-bank environment, everything is on the table.

I'm Jeff Horwich for Marketplace.

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