Just how painful will the Fed's new rules on interchange fees on swiped debit card transactions be for banks and credit card companies? Visa and MasterCard sold off on news of the rules. Many are convinced banks have also been dealt a tough deal and are vulnerable as well. These fees amounted to $15 billion last year.

The new rules basically cut the fee per transaction, requiring it be calibrated to offset the specific cost of the transaction itself. The Fed suggested a safe harbor of 7 cents, but it will allow banks to calculate their own average costs and charge up to 12 cents, which is seen as the upper limit to which most banks will gravitate.

Merchants have long complained about these fees and are hailing the rules as a victory. According to one analyst, the new rules amount to an 80 percent to 90 percent cut in the fees that Visa and MasterCard pass on to banks, which are eventually passed on to merchants, notes Bloomberg.

Banks and credit card companies will continue to fight the new Dodd-Frank rules, as they stand to lose billions. The Fed, however, indicated that banks would not be stopped from offsetting these losses by charging fees to cardholders in other ways. The new rules would also allow merchants to choose from at least two independent debit networks, a measure designed at fostering competition.

The law requires the interchange rules to be written by April 21 and implemented by July 21.

For more:
- here's an article from The Hill
- here's a Bloomberg article

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