It would be amusing to watch individuals, institutions or government agencies try to “get around” the laws of economics – if ignoring economic principles did not cause so much trouble.
Prodded by Congress, the Federal Reserve has proposed a cap on the fees that banks charge to businesses for debit card transactions. The Fed says its proposed limit of 12 cents per transaction – about a 73 percent cut from the current average fee – is “enough” for banks to charge.
You might think, well, what’s wrong with a 12-cent cap on debit card transactions? Won’t that mean lower costs for consumers and the businesses where they use their debit cards?
The answer is “yes” – and “no.”
The cap would reduce debit card transaction costs. But limiting those costs doesn’t reduce the banks’ need to “pay their bills.” So they have to make up that lost revenue somewhere else.