....But for one section of the bill, what began as a valiant attempt to score points for consumers and small businesses may end up haunted by unintended consequences. I'm talking about the regulation of debit-card interchange fees -- 1%-3% licks off the top of every purchase you make with a debit card, paid by merchants.
Here's how it works: Say you make a $100 purchase at the grocery store, paid on your debit card. For the privilege of processing the transaction, the grocer owes the card processor -- usually Visa (NYSE: V) or MasterCard (NYSE: MA) -- between $1 and $3 in interchange fees (plus a few other nominal fees for service). That's the cost of doing business. Visa and MasterCard then remit substantially all interchange fees back to the bank that issued you the card. Today, Citigroup (NYSE: C), Bank of America (NYSE: BAC), JPMorgan Chase(NYSE: JPM), and Wells Fargo dominate this market. For retailers with sliver-thin margins, interchange fees can be deadly serious. Costco(Nasdaq: COST), for example, doesn't allow customers to pay with anything other than cash, check, pin-based debit (different than so-called signature debit) ), its own self-branded credit cards, or American Express (NYSE: AXP), which negotiated a special deal in exchange for exclusivity in 1999. That lets Costco avoid most interchange fees and keep retail margins extremely low, which is how its business model works.
But most retailers could never get away with this, and many get gutted...<<read more>>
