The Campaign Against Capping Debit Card Fees

(h/t Jerry) David Frum is not persuaded by the Big Banks:

The big banks are pressing Congress for a favor that will cost the average American household $230 a year. The bankers argue that the favor is needed to support small community banks. But since the lion's share of the favor will be collected by just four banks, it might be cheaper to subsidize community banks with a check direct from the Treasury.

So what's the favor?

The favor is contained in the small fee you pay every time you use a debit or credit card. Banks charge an average of about 1% on debit card transactions. In Australia, where swipe fees are regulated, banks charge half as much -- and still earn a profit.

Why are debit fees so high? No great mystery. ... Credit cards of course pay banks not only a swipe fee, but very high interest rates. Banks are frightened that if they offered cheaper debit fees, many merchants might quit accepting credit cards altogether. They now threaten that if they cannot collect high fees on debit cards, they would have to cap debit purchases at $50 or $100.

...The banks dread a world in which consumers pay cash instead of borrowing at 18%. The recession has brought closer such a world: total debit transactions now exceed credit transactions.

...This year, banks are feeling feistier. They are lobbying hard to repeal the cap on debit card fees in advance of the July date when Dodd-Frank goes into effect. Washington media are filling with ads from banks and merchants arguing their case. But Congress is not swayed by arguments. It is swayed by clout -- and on this issue, it is the banks who have the clout.