You're the Boss: Will the Fed’s Debit Fee Rule Help Merchants?

Trader Mark submits:The stocks of both Visa (V) and MasterCard (MA) took a deep dive just after 2 PM when it was released that the Fed is considering a 12 cent cap on debit card transactions. Visa has a broader exposure to debit cards, so it seems to be taking the news a bit worse.

Ever wondered how your Visa card works? Andrew Martin has you covered:

By Dana Blankenhorn: Credit cards. Credit cards have always been more profitable to the big banks than debit cards have. Most carry an annual fee. They cost merchants 2% minimum in “discounts” meant to assure payment from consumers. They cost more to process. And they carry very high interest rates, rates that can be jacked up if consumers don't pay off their bills in a timely manner.

Visa & MasterCard May Hike Debit Card Costs Visa and MasterCard are planning to dramatically raise the fee charged to merchants when consumers use a debit card to purchase small ticket items, according to Janney Capital Markets analyst Thomas McCrohan. Currently, a merchant pays about 8 cents to the card networks to process the debit ...

There are other, less fee-laden prepaid debit cards out there than this.

A sample of the new ID card, which uses the MasterCard network.

Debit cards were supposed to be toast. The industry started writing their obituary when financial reform targeted overdraft fees and interchange or “swipe” fees, which had made debit cards extremely lucrative for banks. So why is it that banks are now pushing debit cards like never before?  A couple years ago, the banking industry warned federal regulators that reform efforts could lead to both an increase in fees and a decrease in debit card usage.