Debit cards to get lower swipe fees. But will consumers benefit?

New swipe-fee rules for debit cards take effect in October, which will mean lower costs for retailers. In some cases, they might pass those savings on to consumers.

But before you whip out a debit card to make your next purchase, consider the downside. Banks are already adjusting to the prospect of losing swipe-fee revenue. That means fewer perks for many bank customers.

For example: Chase’s debit rewards program is set to expire, and many other banks have already done away with the once-ubiquitous perk. Free checking is now more likely to come only with a minimum balance, minimum usage, or online-only requirement. And some banks are considering ways to push customers to use their credit cards, perhaps instituting a $50 or $100 per-transaction limit on debit cards. (Swipe fees for credit cards aren't capped.)

Wealthy consumers will still be winners when the so-called Durbin Amendment takes effect. They will continue to earn rewards on their credit cards and they'll have the minimum balances necessary to enjoy free checking. The poor, on the other hand, will be less likely to qualify for free checking and they will lose out on debit rewards.

Will retailers lower their prices? That was the hope when Congress passed the Durbin amendment, a hasty addition to the Dodd-Frank reform bill, last year. It's not clear they will lower prices.

Retailers are the most likely victors of the reforms. Merchants from gas stations to boutique stores are subject to swipe – or interchange – fees, a charge levied by card networks every time a customer uses debit or credit. Unfortunately, the two dominant players, Visa and MasterCard, can pretty much dictate their chosen prices. The largest stores, such as Walmart and Target, can negotiate lower swipe fees, but smaller retailers with no such bargaining power must hand over a higher percentage of each transaction to the credit-card companies. Banks that issue the cards receive the largest cut of those swipe fees.

Thus, the average debit transaction of $38 cost a retailer an average 44 cent interchange fee. Under the new rules of the Federal Reserve, that fee would be capped at 21 cents, plus 0.05 percent of the transaction, with the possibility of charging 1 cent more if certain security – or a grand total of 24 cents. That's double the 12 cents the Fed originally proposed, before intense lobbying from the banking industry to push up the fees. Still, it's a significant loss of revenue.

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