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New CA Bill Would Do Away With Debit Card Fees

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Merchants would not be allowed to charge customers who pay with a debit card an additional fee under a bill headed to the California Assembly.

Some payment networks, such as Visa, prohibit retailers from charging debit transaction fees, but that hasn’t stopped the practice, meaning customers get dinged anywhere from 45 cents to a buck. The new bill would make this illegal. Click to Listen

“The fee is collected by the issuing bank, but the retailer also is in on the game because they have some discretion in what’s called a “checkout fee,” so it’s a pretty cozy little relationship,” said Curtis Arnold, founder of Card-Ratings.com.

He says retailers argue that they have to pay card issuers, like Visa and Mastercard, “swipe fees,” because if they don’t pass some of the cost along, it will drive them out of business.

In the end it may be another case of the law keeping up with the times. Legislation was passed banning transaction fees on credit cards 25 years ago, long before debit cards became popular.

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