Why Retailers Party Harder than Consumers at Swipe Fee Anniversary

NEW YORK (TheStreet) -- Oct.1 marked the first anniversary of the regulations that reduced the swipe fee merchants paid to banks and card processors on debit card transactions.

Retailers and merchants appear to be the big winners from this reduced interchange fee that resulted from the Durbin Amendment to the Dodd-Frank Wall Street Reform Act.

The goal of the Amendment was to make swipe fees reasonable and proportionate to the actual cost of processing a transaction. Before the legislation, the interchange fee averaged 44 cents per transaction. The fee is now 21 cents plus an additional amount to cover losses from fraud.

Politicians thought retailers would pass on these savings to consumers.

According to estimates from the National Retail Federation, retailers are saving nearly $18 million a day that they previously paid to card issuers and banks, but consumers are hard-pressed to see the results in their pocketbooks.

Very few stores have reduced their prices as a result of this decrease in swipe fees. Instead, the regulation has caused banks to look for additional sources of revenue to make up for this decrease in interchange fees.

As a result, many consumers are paying higher bank fees, especially on checking accounts.

Nearly every bank has eliminated their debit card reward programs.

Several major banks even tested a monthly fee on consumers who use their debit card, including a $5 fee from Bank of America (BAC), that ignited consumer anger across the country. Banks quickly backed down and removed the fee.

Retailers continue to say the swipe fee reform is benefiting consumers.

"Merchants haven't necessarily labeled the savings from reform as a 'debit discount' but they have nonetheless found a variety of ways to pass the value along to their customers," NRF president and CEO Matthew Shay says in a press release. "Depending on the store, shoppers are paying lower prices, getting better service or avoiding prices hikes that otherwise would have come with inflation."

Bill Hardekopf is chief executive of LowCards.com, which compares and rates more than 1,000 credit cards. He is the co-author of "The Credit Card Guidebook."