Last week I was in Washington DC, and it seemed like every time I turned on the radio I heard an advertisement calling for action to lower the “swipe” fees merchants pay when they accept debit and credit cards. Retailers’ efforts to curb these fees appear to be working, as the Senate overwhelmingly passed an amendment to the financial reform legislation aimed at helping reduce the “interchange” fees small businesses pay on debit card sales.

Introduced by Assistant Senate Majority Leader Dick Durbin (D-IL), this legislation would direct the Fed to issue rules to ensure that debit interchange fees are reasonable and proportional to the processing costs incurred. Visa and MasterCard currently charge debit interchange fees of around 1-2% of the transaction amount. Proponents of this amendment say that while processing fees have decreased, interchange fees have increased. The ads I heard called these fees a hidden tax on retail purchases.

Whether or not consumers will see prices come down if interchange fees come down is is debatable. A press release issued by Durbin’s office states that an estimated $48 billion in swipe fees were charged by credit and debit card networks in 2008 and that 80% of this money went to ten large banks.

Minimum Purchase Requirements

However, the provision that most interests me is the one that would allow merchants to impose a minimum purchase amount for card purchases. Currently, merchants are supposed to accept your debit card for purchase of any amount. (Those signs posted in stores claiming a $10 minimum purchase required for debit or credit cards are technically violating those merchant agreements with their banks.) The press release on Senator Durbin’s web site says the minimum would apply to credit card purchases, however when I read the legislation, it appeared to me that it applies to both credit and debit card purchases.

About 20 years ago, when I was working for a consumer group in Washington, we first alerted consumers to the fact that minimum purchase requirements are not allowed under Visa and MasterCard’s rules. We were absolutely flooded with consumer requests for more information. It seems they really wanted to be able to use their cards whenever and wherever they could.

Since that time, a lot of us (myself included) have gotten away from carrying cash. Instead, we whip out or debit or credit card for all kinds of purchases – even small ones. What would be the possible effect of allowing merchants to set minimum purchase amounts for debit or credit card transactions?

- Consumers may find themselves spending more on a purchase to meet the minimum if they don't have enough cash on hand.

- ATM fees may see a boost as consumers scramble to pull out cash to cover small purchases.

However, if merchants were free to set minimum purchase requirements then perhaps the industry would come up with more competitive pricing to make accepting cards for small purchases more attractive to retailers. What do you think? Are you accustomed to using your credit or debit cards for small purchases? Do you think the rules should be changed? Are you a small business owner who would like to be able to impose minimum purchase requirements? Share your comments below.

National Consumer Protection Week is the perfect opportunity to protect yourself. We consumers now enjoy significant protections from adverse treatment by our credit card issuers under the CARD Act (get detailed information about the CARD Act's provisions). That's the good news. The bad news is that many of those protections require action on our part. It's not significant action. We just have to be more diligent and actually read our mail.



If our credit card issuers increase our interest rates or implement new credit card fees, they are required to give us a 45-day notice of the change. And, we have the right during that 45 days to opt out of the change and pay off the balance under the old interest rate terms. This is a significant protection from higher rates, but it requires that we proactively contact our issuers to opt out.

Roughly 97% of us do not read our bank notices. And, if we do not respond with our intention to opt out within the 45 days allotted to us under the CARD Act, then the issuer can increase our rates on all new purchases. So, Step #1 for protecting ourselves from higher interest rates and annual fees is to open all of the mail we receive from our credit card issuers -- and READ it.

John Ulzheimer – Credit scoring and credit reporting expert and author, John is the President of Consumer Education for Credit.com. Formerly with Equifax and Fair Isaac, John shares his unique insight of the inner workings of credit scoring models and the credit reporting industry on CreditBloggers.com.

Credit.com's John Ulzheimer appeared on FOX Business to discuss whether or not the new CARD Act laws will benefit consumers. Interestingly enough, the new laws may actually hurt more than they help.  Watch the clip:

To read more about John's thoughts on the CARD Act, visit our News Center to read his latest article: The New Credit Card Law: A Good Idea, But Consumers Still Lose

John Ulzheimer – Credit scoring and credit reporting expert and author, John is the President of Consumer Education for Credit.com. Formerly with Equifax and Fair Isaac, John shares his unique insight of the inner workings of credit scoring models and the credit reporting industry on CreditBloggers.com.

Credit.com's John Ulzheimer appeared on FOX Business to discuss whether or not the new CARD Act laws will benefit consumers. Interestingly enough, the new laws may actually hurt more than they help.  Watch the clip:

To read more about John's thoughts on the CARD Act, visit our news center to read his latest article: The New Credit Card Law: A Good Idea, But Consumers Still Lose

John Ulzheimer – Credit scoring and credit reporting expert and author, John is the President of Consumer Education for Credit.com. Formerly with Equifax and Fair Isaac, John shares his unique insight of the inner workings of credit scoring models and the credit reporting industry on CreditBloggers.com.