Legislation could help curtail consumer credit card use

A current Federal Reserve proposal, aimed at cutting debit card transaction fees for merchants, could help steer consumers away from accumulating credit card debt on purchases.

The Federal Reserve plans to cut debit card transaction fees to as little as 12 cents, replacing the old model, which charged merchants as much as 1 to 5 percent of the purchase price.

“Interchange fees on all of these transactions, credit and debit, need to be carefully scrutinized,” said U.S. Senator Dick Durbin, Bloomberg reports. “There is terrible abuse taking place today at the expense of retailers and consumers.”

This means consumers could be able to save up to $20 on the purchase of a $1,000 television set, a development that may entice consumers to pay for larger items with debit rather than credit. In addition, merchants are expected to offer lower prices to those who choose debit, cash, checks and other low-cost purchasing methods.

This cap on fees could be in place by July 21, which is the deadline for lenders to comply with The Dodd-Frank Act, the news source says. Credit card fees, however, will remain unchanged by the legislative moves.