Visa Inc. (NYSE: V), MasterCard Inc. (NYSE: MA) Suffer From Interchange Fees Slashing

The U.S. Federal Reserve dealt a blow to credit card providers and banks yesterday (Thursday) with a proposal to cut debit card transaction processing fees as much as 90%. Congress directed the Federal Reserve as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act to review the debit card swipe fees - or " interchange fees " - charged by banks and card networks to determine if they were "reasonable and proportional" to the transaction processing cost. Analysts had expected the result would be a reduction in fees of up to 50%. The proposal went beyond estimates, aiming to cap the interchange fees at 7 cents to 12 cents per transaction, or about 0.3% of the face value of the average purchase. This would be about an 84% drop from the current 1.3% average, or 44 cents, per transaction. " Nobody expected it to be this draconian, " said David Robertson, publisher of the credit-card industry newsletter the Nilson Report .