Many believed that when the Federal Reserve Board introduced restrictions on how much credit networks could charge merchants for processing debit card transactions, those savings would be passed on to the consumer and lead to less credit card debt. But some financial experts say that the opposite is true.
The Fed's latest rules limit the amount credit networks can charge for processing debit card transactions to just 12 cents. But financial experts worry that the restrictions' lack of a mandate for passing those saving on to consumers will not lead to lower prices, according to a report from the Philadelphia Inquirer. In fact, they say that it could lead to more credit card debt as lenders introduce new fees and higher interest rates in an attempt to make up for lost profits.
"We think the unintended consequences of this legislation will be an environment that is actually bad for consumers, not good for them," analysts Thomas McCrohan and Len DeProspo told Janney Capital Markets clients, the newspaper said.
Many lenders have actually added rewards programs for credit card debt, but at the same time have reintroduced long-absent charges such as annual fees, and increased rates.