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debitcard_Edited.jpgDid you know that financial institutions make money every time you swipe your debit card?

No, you're not being charged without your knowledge. Financial institutions actually earn a percentage or your transaction amount--about 1.14%--and the merchant is the one required to foot the bill for utilizing the debit service. Yeah, 1.14%; that's not too much right? Wrong. Considering each purchase, it's certainly not a very large amount. After all, 1.14% of a $1,000 purchase is only $11.40. The kicker, though, is when you account for the amount of individual debit swipes per year for every debit card in the country, all 520 million of them. Debit swipes alone contribute around $16 billion to the financial industry.

Never fear. The Federal Reserve is here! And they're cracking down on financial institutions' take on the loot.

The interchange fee (i.e., the amount awarded to financial institutions to process debit swipes and cover fraudulent charges) will be limited to 12 cents for all purchases, no matter the amount. This essentially will cause financial institutions to miss out on billions per year. The problem, however, is financial institutions are threatening to not allow debit purchases below $50 or $100. Basically, if they can't recoup the funds they feel they deserve, we're going to pay for it (metaphorically).

The final outcome--whether this is actually going to pass--will be issued in April. Now we just have to wait and cross our fingers. If financial institutions put a minimum amount on our debit purchases, consumers may be forced to return to checks and carrying vast amounts of money, or, if they can actually qualify, put everything on credit cards. And that is certainly a scary thought.

I wrote a blog post back in October about this silly little campaign called Stand Up For Your Right to Write Checks. At the time, it seemed a silly idea. But now, checks could be one of the major sources of transaction again. If they'll allow me to make purchases less than $50 or $100 without keeping cash on my person, I'll give 'em a go. Thanks financial system!

Photo taken from this photostream and used with permission of a Creative Commons license.