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Federal Reserve ruling may affect debit card use

The Federal Reserve announced it would appeal a ruling concerning debit card transaction fees. Banks and financial companies had proposed a transaction fee change for retailers when consumers used their debit cards in stores. In July 2013, Judge Richard J. Leon of the Federal District Court ruled against any fee increase, and many retail organizations were pleased with the news as it required the Federal Reserve to ask for even lower fees with debit card transactions, according to the New York Times.

However, the primary lawyer for the Federal Reserve announced that the central bank would be appealing the judge's decision against a fee increase. The appeal would be in the best interest of consumers, according to Frank Keating, the president of the American Bankers Association, because it would help strengthen the financial institutions that offer services to the public.

Industry experts bring problems to light
In an article for the Wall Street Journal, Charles Passy wrote banking industry professionals pointed out that bank revenue needs to remain where it is or increase and raising transaction fees with retailers was one way of doing that.

Banks will still need to earn money and may have to turn to alternative options, such as higher activation fees. This could mean customers may not use debit cards with such high frequency as before. With less debit card use, the American public will turn to cash and need to have the convenience of purchasing goods with cash and change. Financial institutions can assist consumers with the transition should one occur by offering money counters, check processing options and adequate customer service. 

How banks can help consumers adapt to possible changes
Though beneficial for banks, the increase in debit card fees for retail stores may have a direct effect on shoppers. Those desiring to pay with cash should have the option to do so, and banks should also be willing to offer the technology and services that will help customers understand their finances and make every piece of spare change count toward their spending and saving habits. Money counting options are always a plus as they help customers know the amount of cash and change they are carrying around and can ultimately spend.

August 29, 2013