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On May 13, 2010, retailers won a victory over the fees they pay to banks for credit cards. An amendment by Sen. Richard J. Durbin is just one more element of the financial regulation overhaul currently underway the Senate.  The measure allows stores to give customers discounts for paying with cash or using cards with cheaper fees, and it would permit retailers to set price thresholds for accepting credit cards. It also tasks the Federal Reserve with crafting regulations for determining whether swipe fees for debit cards are “reasonable and proportional.”

QUESTIONS:

1. What is the average amount that retailers pay to credit card companies?

2. Explain how a retailer makes a journal entry for a credit card sale that includes these swipe fees.

3. Explain how you believe retailers will make journal entries for sales with cash discounts, under the new regulations.

SOURCE:

Dennis, B. and Y. Mui. (2010). Senate Passes Amendment on Debit and Credit Card Swipe Fees,  The Washington Post, May 14. (Retrievable online at http://www.washingtonpost.com/wp-dyn/content/article/2010/05/13/AR2010051303571.html)

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