Person to Person Lending Guide

person to person lendingIn 2011, we saw banks completely shut down credit lines, homes were foreclosed and interest rates were raised.  It really was a war-zone for a while.  What if I told you that you don’t have to rely on banks for lending?!

Banks are not the “end all” for every type of situation.  Yes, they’re useful under certain circumstances, but you really don’t “need” a bank.

So, what if you get stiff armed by a bank?  What do you do?  Where do you go…

Well, this is where person to person lending comes in, also known as peer to peer lending.  At it’s core, it’s exactly what it means.  A person has cash sitting around and would like to make some additional interest on their money.  So, that person would lend their money to someone in need.  As a return the borrower would pay interest to the lender.  It’s as simple as that.

Don’t know where to start?  You can head over to Lending Club or Prosper and get an account. Both are excellent companies with a long track record.  Both offer personal loans with interest rates that rival big name banks!  I personally haven’t used either of these companies but my friend Peter from Bible Money Matters has.  You can check out his experience with Lending club here.

So, what are these two companies all about?  It’s actually pretty simple how they work.  If you are a borrower, you can apply for a personal loan.  If I was a lender I would agree to loan out my money or pass up on an offer.  Once the agreed amount is set in stone and the person has enough lenders, the full loan amount is given out and the borrower makes monthly payments.  It really is a cool concept and opens p doors for small businesses to get the loans they need or for people to skip out on banks for smaller loans.


What borrowers need to know

If you’re seriously interested in taking out a personal loan, the first step is to fill out an application. You’ll be asked about your credit history, how much you want to take out, and the reasons you want a loan.  it’s all pretty straightforward stuff.  The flexibility of a person to person loan is greatly beneficial for someone starting a business or even paying off a college loan!  In terms of loan schedules, a typical contract length is 3 years.  However, a five year loan is now becoming more and more common.  Once your loan is approved you can transfer the money you requested and start making payments to your lending site.


What lenders need to know

These types of sites make it so incredibly easy to become a lender and be successful at it.  You can lend as little as $25 and make your own decision on which borrower to lend your money to. Both Lending Club and Prosper provide a wealth of information on the people you’re lending money to.  Like all things in life, there is a risk of being a lender: the borrower could default on your loan.  Although this is rare if you do the proper research, you shouldn’t be surprised if it happened. All in all, being a lender is awesome because you’re making money off of other people.


Who can get a person to person loan?

There are some basic requirements to get a peer to peer loan.  They’re pretty basic:

-Must be a US citizen

-Ownership of a valid bank account

-Be of at least 18 years of age

-Have a social security number


Applying for a person to person loan

So now that you’re ready to apply for a personal loan, what’s next?  On either site, you’ll have to open an account where you will input your basic information like email address and contact info. Once this step is complete, you will be checked for good credit.  Have all pertinent information ready just in case you’re asked for it.  Once a loan is approved, you can easily transfer the money into your personal checking or savings account.  It really is as simple as that.  Peer to peer lending companies want to make it clear as to what you need to do to get a loan approved.  It’s a win-win if you get approved for a loan!


What are the benefits with person to person lending?

The benefits are too great to list out here but person to person lending is a wonderful way to get capital fast when you need it most.  This is an especially great route if you have some high interest credit card debt.  Instead of paying 15% interest on a credit card, you could be paying it off with a low interest loan from one of the lending companies mentioned above!

At the end of the day, peer to peer lending provides an excellent opportunity to avoid banks and manage your money the way you want.

Again, here are the only peer to peer lending companies that I recommend to Free Money Wisdom readers:


Lending Club



What are your experiences with person to person lending?  Please comment below!

Debt Repayment and Payday Loans

debt repayment I don’t know if you’ve heard of a pay day loan but it really is an interesting concept.  In times of crisis, many companies have cash on hand and want to loan it to you.  You will have to pay a hefty price for that “emergency money” with high interest rates and other associated fees.

We never know when emergencies will come up.  Things like medical emergencies, car breakdowns, and job loss are all unplanned emergencies.  We would never wish these situations on other people and many times it causes financial strain.  This is where payday loan companies come in.

Typically, a payday loan is no longer than two weeks and they will charge you a high interest rate for that period.  You will probably have the option to roll this loan over to a second one after the two weeks are up.

These types of payday loans serve people well in times of stress and serious emergencies.  The other side of the fence believes that this time of lending is unethical and borders on predatory lending.  You don’t want to be taken advantage of and find yourself looking for free debt consolidation.

So, how do you know if this type of loan is for you?  Well, one should look at their finances and be confident that you will repay the interest after the loan is complete.  This is critical to avoid added debt and financial ruin.  They are here to lend money in times of need, however, they want their interest and they will get it.  You need to understand what you’re getting involved in and make a  conscious, thoughtful decision.  You will want to avoid debt in all thee cases.

At the end of the day, you need to take a good hard look at your  time frame  and decide whether or not a payday loan is made for you.  Interest will pile on extremely quick so taking too long to pay off the loan is a reason to avoid this situation altogether.  If it’s a small, easily manageable situation, a payday loan may work for you.

photo by alancleaver_2000

Biblical View on Paying with Cash to Get Out of Debt

cash to get out of debtHow many times do you hear or read that Credit Card A pays X-percent on their rebate program, or Chevyotassan Motors is offering zero percent financing on their 2011 model Q cars? How about 90 days financing as good as cash?❠Or the favorite of all credit offers–buy now and pay NO interest until January 2013?

You can’t blame businesses for trying to grease the wheels of their sales by offering too-good-to-pass-up financing deals. And maybe these packages are even all that they say they are. Does that mean you should jump and buy if they are?

Not if you’re already in debt. In fact your plunge into debt may have started with just such an offer. You get into one easy payment planâ, which is followed by another and still more. Before too long you’re on a debt treadmill that you aren’t sure you can get off of.

Getting into debt is always easier than getting out of it. There are different ways to get out of debt once you have too much of it, but the foundation of it all is changing your financial behaviorâ”and learning to pay with cash. And by cash, I mean debit cards, checks, automatic debits and the Federal Reserve Notes in your wallet that most of us refer to as moneyâ.


Getting out of debt starts with not using credit anymore

Part of the problem with debt is that it’s cumulativeâ”if you’re adding new debt before you’ve paid off old debt, the pile is only getting bigger. The first, best way to get out of debt then is to stop taking on new debt, and the way to do that is to put away your credit cards, ignore the come-on loan offers and pay cash on the barrel.

Cash is the only way to guarantee that you’re living within your means. People get caught up in favorable terms, like low interest rates or zero interest rates or no payments for six monthsâ, ignoring the basic fact that even if you have no interest to pay, you still have a debt to be serviced. Worse, you’re still paying with money you don’t have.


Use of debt is a form of voluntary bondageâ”at first

The rich rule over the poor, and the borrower is slave to the lender.ââ”Proverbs 22:7

Slave is a heavy word, and in a world that’s been running on easy credit for several generations, it isn’t one we normally associate with borrowing. Yet if you’re in debt to anyone, you have entered into an arrangement that approaches slavery on some level. For example, you are legally bound to pay the loan according to the terms of the loan agreement, which is to say that you’ve given at least partial control of your incomeâ”and even you’re assetsâ”to the lender.

No matter what soft or emotionally comforting labels you may place on your debt, your freedom of action will be limited by the loan. If you have several loans, the servitude will be even greater. Bankruptcy and foreclosure occur when lenders have control over more of your resources than you do.

Even if your debt situation doesn’t require bankruptcy or foreclosure, it will still restrict your life. You may not be able to change jobs, do mission work or make a geographic move because of your debt obligations.

You’ll free yourself of those limits when you come to equate cash with freedom, and debt with bondage.


Debt says I can❠when reality screams I can’t!â

Credit has become something like a financial drive-through window; its purpose for existing is mostly to keep the economy running. Don’t have any money? No problemâ”drive up to the credit window, get a loan, then pick up you’re merchandise at the front desk.

We’re paying a steep price for that convenience. Credit gives us the option to buy what we know we can’t afford, and sooner or later you’ll use that option even when the little voice inside❠is telling you otherwise.

Even if you pay your credit card balances in full each month, you’re still living on a floatââ”paying this months bills with next months income. If next month has a major expense surprise, or if your income is disrupted, this month’s bills might not be paid next month, but carried into the following month where it becomes permanent debt. That can’t happen if you pay for this month’s expenses in cash. Everything you buy is paid for so there’s never any debt being carried forward.


Like anything else that isn’t good for us, debt is mostly a bad habit

One of the problems with debt is that today we have a benign view of it. It’s less of a thing or event than it is a lifestyle. You generally see people who are either debt adverse, and therefore debt free, or those who see debt as a convenient enabler to get them from where they are to where they want to be. For people in the latter category, credit becomes a habit, a way of doing business. What’s so bad about that?

And lead us not into temptationâ¦ââ”Matthew 6:13

Is it a sin borrow money? Probably not. But it’s pretty safe to say that it IS a temptationâ”one that draws us to spend money we don’t have, to buy things we often don’t need and to extend ourselves into bondage. How well are we able to resist temptation when we put ourselves so close to it?

If we can put some distance between ourselves and creditâ”maybe not to see it as a sin, but not to view it as holy eitherâ”we take ourselves out of harms way. Cash is the best way to do this.


The simplicity of cash to the rescue

You’ll enjoy the following benefits if you begin paying cash for all of your purchases:

  1. You’ll never spend more money than you actually have
  2. You’ll never get stuck paying last months bills this month
  3. You won’t live in fear that you might have charged too much
  4. Your debts will stop growing, and as you pay them, they’ll eventually disappear
  5. As your debts fall, you’ll have even more cash either to spend or to save
  6. If you choose to save your extra cash, your savings will eventually replace credit as your preferred source of extra money
  7. As your savings grow, you can pay cash even for major purchases, like repairs, furniture and even cars
  8. When every thing you own is owned free and clear, YOU’LL be free and clear!

So simple, yet so powerful. Pay cash from now on, pay your debts faithfully and even if you do nothing else, in a few years, you’ll be debt free.

Let Savings Fall Onto Your Lap

savingsI’ve always believed that as long as your vacation is ahead of you, summer is clearly not over. It’s not unusual for me to wait until the fall, September or even October to make my yearly escape from the everyday grind. After all, I live in New York, so jaunting off during the summer months simply to lie on a beach is no enticement to me; we are frankly surrounded by beaches.

In fact, many New Yorkers save their vacation time for the winter months; that’s about when we start to get homesick for our beach-lying days. As a massive money-saver, I really enjoy the fact that my off-season vacationing can lead to a lot of savings, but most of all I appreciate dealing with a lot less crowds! Does anyone feel like Disney?

Vacation when no else is

The Travel Industry Association estimates that 23% of people report taking their vacation in the fall, which is a sharp drop from the 38% who reported a preference for vacationing during the summer months; fortunately, as the masses reduce, so do the prices. In resort areas known for their postcard-worthy beaches, the price drop is particularly noticeable. The Caribbean and Florida are two prime examples of this; hotel rates alone can see their rates drop almost 40% compared to peak season.

There are some places where tourism never seems to cease, big cities like New York and Chicago never seem to offer a prolonged period of off-season rates. But I live in New York and assume Chicago is pretty similar. Why would I want to go there?

Utilize credit cards to your advantage

I also fill out a lot of credit card applications throughout the year, simply to enhance my vacation savings when the time comes. Like many, I only associated the frequent flyer miles on my credit card with vacation savings, over the years I have expanded my repertoire, using different credit cards for everything from gas to hotel stays, each with their own built-in savings. Of course the flyer miles are probably still the best savings there is, but even with that, I no longer settle for just the typical 20,000 miles or so. Why would I when there are offers out there of up to 100,000 miles. They are not as easy to come by, but they do exist.

Do your research first

A lot of cards offer hotel programs:   these can lead to major savings, but it does take a little more work to do a proper comparison shopping on these cards. Often they will have a lot of blackout dates and capacity limitations. The ones that claim there are no blackout dates will instead have some strong capacity restrictions. Do your homework on these and you can save some serious cash. For local trips I, of course, have a gas card credit card that I use. Of course, with the high price of gasoline over the past several years, I often think it would be cheaper just to fly. Sometimes taking the scenic route can end up being the best part of your vacation. If it makes you feel any better, think of it this way:  using a gas card which earns money back means the more that you spend, the more you are actually saving. OK, so it’s a bit of a justification, but it is true nonetheless.

One other tip I learned the hard way: it you are going overseas on your vacation, make sure you use a card that at doesn’t charge a foreign transaction fee. Most do and you will end up paying more for every purchase that you make â“ a real vacation killer for me!

Pay Cash or Finance a Car? That is the Question!

finance your next carWhen it comes to purchasing that shiny new car, you might be confused as to whether you should pay cash or finance it. With all the talk about personal finance these days, most people are either on one side of the fence or the other. You have one group of people who pay cash for everything and don’t believe in having any debt at all. Then there is another group of people who finance all kinds of stuff with the intention of paying everything off quickly. There are pros and cons to each approach that we will discuss below.


Perks of using Cash

When you pay cash, you get the perk of not having a monthly car loan payment to deal with. The feeling of not having to scratch out a check each month to pay for your car is a great one. Plus, if you run into any kind of financial, job-related or medical issues, you don’t have the worry of paying your car payment each month. When you pay cash, you also eliminate the need to pay finance charges and interest each month.

Another perk of using cash is that you can sell the car at any time, even if it’s at a loss. Buying a car with cash allows you to have a monthly budget with less of a strain. However, there are some cons to using cash to buy your car.


Obvious Negatives

The first negative for using cash is that you are using up your liquid assets to pay for something that will only go down in value. What else could you use that money for that might earn you a better return on your investment? Secondly, when you use cash you are taking away from emergency funds that might be needed for something else later. This means that you have to be very sure that your emergency fund is in place even when you take out money to purchase a car. You don’t want to put yourself in the position of not having liquid assets when you need them.


No Absolutes Here Folks!

So does this mean that you should always finance a car? Not necessarily. Again, there are pros and cons to both scenarios. Most people like financing simply because it means you’re using someone else’s money to pay for your car. Again, this frees up your cash assets for other important needs. Unlike a lease, financing a car means that you will own it once you have paid all of your monthly payments. There are some great loan deals out there including no money down and a 0% APR.


Bad Credit Might be an Issue

For people with credit problems, getting financing for a car might prove to be difficult. Many people with credit issues find that they have to purchase a car with cash simply for this reason. In addition, having a monthly car payment can put a strain on your budget and cause you financial problems if you lose your job or have other issues that affect your monthly finances. Anytime you are going to take on a monthly debt obligations, you really need to think through it clearly to make sure that makes the most sense for your specific situation.


Measure Twice, Cut Once

Whether you pay cash or finance a car, it’s likely to lose value almost as soon as you drive it off the lot. That’s why it takes careful consideration to make sure that you’re making the right decision for your personal financial situation. Much like a house, purchasing a car is a large financial investment and requires forethought to make sure that you’re not going to put yourself in tricky financial waters.

5 Ways to Maintain a Clean Credit Score

clean credit scoreThe American public has been both confused and incensed at the debt debate, by not only at how prolonged and divergent both sides have been, but also at how the government allowed us to get into this unfortunate and avoidable situation. With a little bit of planning and diligence, bad credit can be avoided whether it belongs to the average consumer, or big government. It’s actually pretty easy to maintain a clean credit score.  An ounce of prevention is worth a pound of cure and there are some simple steps you can take before your credit rating starts to plummet.


Know Thy Credit Score

Credit scores are based on a combination of factors. Five key factors are as follows: payment history, mix of credit, level of debt, credit age, and recent credit. Even if you pass the test in all of these categories, keep in mind that credit reports are not faultless. An error on your credit report is not an unusual occurrence. For this reason alone, it is imperative that you check your credit report regularly; besides simple error, there is also the risk of identity theft and credit card fraud.


Keep Thy Balances Low

While it can be gratifying to be extended to a higher credit limit, it is no reason to run out and max out your cards. Keep in mind that the higher a balance you are carrying, the less available credit is being offered to you. This will adversely affect your credit score. Every so often, lenders will raise your credit limit if requested to do so; if you’ve had a credit card for a couple of years without an increase in your limit, it may pay to call the lender and request one.


Limit the Amount of Credit Applications

While credit inquiries are only a small part of your overall score, (10%), they do in fact count. There is no need to go crazy filling out credit card applications. Carrying one each of the three major cards should suffice for most consumers’ credit card needs. The same holds true for loans; applying for loans will lower your score. Keep in mind that new cards or loans will also lower your credit age when averaged in with your current number.


Keep Inactive Credit Cards Open

Contrary to what many would believe, closing unused or old credit cards will actually lower your credit score. Credit age counts for 15% of your overall score. Closing an older credit card will shorten the length of your credit age, thus lowering your score. Many erroneously believe that this act will be to their advantage, but in the end, they suffer lower credit scores.


Pay Off Credit ASAP!

The old belief was that credit card companies prefer those who paid off only the minimum balance due on their cards: it makes sense because the lender makes more money off folks who handle their credit in this manner, given the high cost of interest. The sluggish economy, rising unemployment rates, and collapse of the housing market now have lenders making a slight adjustment in their thinking. The borrow-and-quickly-repay crowd is now their preference. Every bill you pay has the possibility of ending up on your credit report, even non-credit bills. While most won’t, should you happen to fall behind on your payments, it may very well end up  on your credit report.


Go Forth and Keep Thy Credit Score High!

So there you have it, a few simple steps that you (or elected officials in Washington) can take to derail the momentum of credit catastrophe and maintain a clean credit score. Of course, the politicians seem to feel they have averted the problem for now, but these tips are still worth keeping in mind. Ten years goes by quickly and Washington’s budget problems are never solved; they are only postponed.


How about you?  What has worked and what hasn’t for your credit score?  Share below with your experiences!


Keep Your Sanity, Use Cash

cash onlyCredit and debit cards carry with them a terrible temptation. There is no discomfort when you use them. Making a large purchase with cash requires you to literally surrender real money from your hand. The pain comes immediately, whereas a credit card carries with it an “I owe you” quality and a debit card doesn’t provide that proverbial sting, because the transaction is conducted electronically.


My experience

I suffered this problem when I first got a debit card. It seemed effortlessly to offer a cashier my card, as if someone else was paying for a book, movie, or food. I also got into a predicament when I began buying a stream of books through online sites such as Amazon. It wasn’t until later that I realized how much I had spent in such a limited period of time, because I was not very thorough with my checkbook.

Maintaining an accurate and updated checkbook is one solution to the problem, but I also found another viable method which hopefully you can use and integrate into your own methods.



First, write out your budget for the month. Now, separate them into two categories: One for purchases, such as rent, which remain constant month after month. The second category is for purchases which can vary, such as gasoline and entertainment, and change frequently.

Take the second list and determine what can be paid for with cash and how much you are able to afford to allocate towards the second category each month. The rule of thumb is to be more liberal than conservative on the estimate.

Have this amount withdrawn from your paycheck or bank account at the beginning of each month and place it into either a specifically marked envelope or in your wallet and wrap it with a rubber band.

Then, simply use cash for your purchases. When you fill up your car at the gas station, eat out, or buy a movie or a video game, use cash.

What this does is make it easy and simple for you to determine how much money you are able to spend per month. All you have to do is look inside of the envelope or your wallet. Whatever you have left is what you can spend.


Observing other people’s mistakes

Working at a sporting goods store, I witnessed hundreds of customers spend over $1000 in a single purchase. Every time they did, it was with a credit card. I sincerely believe if they had reached into their wallet and taken out the cash equivalent, they would have taken a long second look at the items were they on the verge of buying and discovered it wasn’t worth the cost to them.

In fact, customers who did pay in cash often reduced the number of items they bought when they realized they didn’t have the necessary amount to pay for it. Rarely did they resort to their card to cover the discrepancy. When people lack of actual money to buy something, it creates a psychologically reaction, which usually makes them hesitant enough to not go through with the purchase. It’s reality politely telling you to ease off on the spending.

And it’s better than watching a cashier swipe your credit card, only to inform you that it’s been denied because you’ve reached your spending limit. Unlike Congress, you can’t raise your credit card limit just because you’ve hit the ceiling.

Certain items, however, can only be bought on the internet, and if you use eBay frequently, it is required to use a credit card. In this case, set up a separate bank account and have a scheduled transfer at the beginning of every month from your primary checking account. If possible, use a certain credit card only for such purchases. As before, it is imperative that you do not initiate any other transfers. Self-control is paramount.

A separate bank account and cash on hand will give you greater flexibility while also maintaining a limit on spending.


Cash makes you think twice

In a digital age like the one we live in, when you use cash, you avoid making purchases you’ll later regret, and it will spare you from a lot of grief which plagues those addicted to card-swiping.

The tale of the Pied Piper of Hamelin is a moral lesson on fiscal responsibility; the people of the town took an “I owe you” on his services, and then regretted their purchase and refused to pay for it. Didn’t quite work out the way they wanted.

Think of the stereotypical adult, who is commonly is depicted buried amid a mountain of monotonous receipts as they attempt to balance their checkbook and confirm the accuracy of every bank statement. It is a tedious and painstaking process which can be circumvented in many instances.

If you use cards less and cash more, you decrease the number of bank transactions, thereby making it less arduous to navigate when you’re inspecting it for any oddities. Additionally, it decreases the chances of identity theft and are easier to detect them they occur.

A lot of identity thieves rely on the proliferative use of credit and debit cards to hide their activities. Often, they will make small, discreet purchases, which will easily blend in with other similar transactions, to test their victims. If no alarms are raised, they will continue doing so until they make such a large purchase that their cover is blown. Prevention requires either a vigilant consumer or a wise consumer.

Ultimately, using cash is a way to prevent bad debt. When you pay with cash, you’re paying up front. There is no monthly payment, no fees, and no interest rate.

photo by seanmcmenemy

Credit Card Mistakes To Avoid at All Costs

credit card mistakesIn many people’s lives, credit cards tend to take on one of two roles. One is that of an indispensable ally, one that is always available to bail you out of a tough situation at any hour of the day or night. The other? Well, that is of a cruel enemy, dragging you into a deep pit of debt and then slapping you with extra fees when you are down. Even when things are harmonious in your financial house, credit cards can be fickle friends. Make one mistake â“ a single missed payment, one charge too many that pushes you over your limit or simply apply for too many cards â“ and it can have a negative impact upon your credit score. That, in turn, can result in higher interest rates and other bad news for your budget.

Here are a few of the most common â“ and not to mention expensive â“ credit card blunders that are best avoided.

Late Payments

It may be fashionable to be late to a party, but it’s downright dumb to be late paying your credit cards bills. Not only will missing a payment cause your card issuer to charge you a late fee, but it will lead to them increasing the interest rates on your account. Your payment history accounts for about 35% of your credit score and one single messed-up payment can cause your score to take a serious dive. If you are not set up to make payments online, make sure you drop your check in the mail well in advance of its due date.

Making the Minimum

If you are trying to pay a balance, you must make more than just the minimum payment. Consider this example put forth by the website,

With a $5,000 balance and annual interest of 14 percent, a $100 minimum payment will pay off the bill in 22 years, with $6,110 going for interest. If you pay $150 a month, the bill is gone in four years with $1,369 in interest.

Federal Laws are now in place requiring lenders to display, on every statement, how long it would take you to pay off a balance making only the minimum payment. This as well as the monthly amount you would need to pay, in order to pay off the debt in three years.

Withdrawing Cash On Your Card

DO NOT, as in ever, ever, ever, use a credit card for cash advances, except in the instance of an absolute emergency. Aside from the dizzyingly high interest rates associated with pulling out cash on your cards, there are typically additional fees. Also, interest begins to accrue IMMEDIATELY on the amount of cash withdrawn which means that you will be paying back much more than you borrowed even if you quick about it.

Paying An Annual Fee

Some rewards cards come with an annual fee and sometimes those rewards are tied to the amount you charge. So no matter how nifty the perks on your plastic, they may not be worth what you will be paying for them. Make sure you are not tempted to spend more than you normally would on your card just to get those rewards.

You should always take the time to make sure you understand the exact terms of your credit card. That way you will avoid unnecessary fees and penalties. If you are in the market for a new card, comparison sites such as credit land can be an invaluable tool. If you know how to use your credit cards mindfully, your wallet will house plastic pal instead of foes.

photo by moneyblognewz

Banks Lose $16 Billion in Swipe Fees

bank feesThere were no winners when, this month, The Federal Reserve announced its concluding regulations that will cap debit card swipe fees charged retailers at 21-cents per transaction. Financial institutions argue that they stand to lose approximately $16 billion per year in revenue collected from merchants, while merchants criticize that the 21-cent cap does little to alleviate their debt burden to the banks and lenders. With neither side celebrating the passage of this regulation, it is difficult to see who exactly benefits or what effect this regulation will have on consumers.

The lending industry currently claims an average debit card swipe fee of 44-cents, thus, imposing a 21-cent cap would greatly diminish their profits. But as every lawyer and financial expert knows, it’s all in how you crunch the numbers.

The 44-cent average swipe fee is actually a composite of two numbers: fees charged on credit card purchases (exempt from these regulations), averaging 56-cents, and fees charged on debit card purchases, averaging 23-cents. With conditions in place that will sometimes allow the 21-cent fee to be raised as high as 24-cents, retailers argue these new laws are essentially pointless.

Lawmakers had originally been proposing a 12-cent cap on debit swipe fees, and while this would have been a much better resolution for retailers, the banks claimed the profit loss would be great enough as to practically make it unprofitable to maintain debit card purchasing as-is. The compromise was to set the cap at 21-cents, plus 5 basis points on the amount of the transaction for fraud costs, plus 1 cent for fraud prevention costs.

Also, financial institutions with $10 billion or less in assets, governmental benefit cards, and certain prepaid cards are exempt from the new law.  There are fears on the part of all credit lenders, exempt from the new regulation or not, that merchants will begin steering customers away from using their debit cards by offering special deals to those who pay with cash or credit, thus furthering their loss.

The results of these new regulations for the consumer will most likely be slow and subtle. Over time, the financial institutions may look for ways to regain whatever monies are lost. A loss of income is rarely just accepted. Higher ATM fees, tighter restrictions, or simply doing away with free checking are all possibilities, as is the implementation of a debit card swipe fee passed directly to the consumer. Simply upon hearing of impending debit card swipe fee reductions, major lenders such as Wells Fargo, Chase, and SunTrust either eliminated, or greatly curtailed, their rewards programs.

As there is little a consumer can do, caught in middle of this power play between the banks and merchants, it could actually work out to the consumer’s advantage. Should retailers offer discounts to those willing to pay with cash or credit, the consumer will profit from this, much to the chagrin of the banks. However, the banks may decide to make up their losses in other ways, so keep an eye on your interest rates and rewards programs to see if they start to fluctuate.

According to a recent poll taken before the Senate vote, the U.S. News & World Report noted that two-thirds of those polled were against a delay in implementing the new swipe fee limits and would view their Senators less favorably❠if they voted to approve the delay. Why consumer opinion would come down on the side of the retailers over the side of the banks, may have more to do with politics than the bill’s ramifications for the consumer. Since the $700 billion bailout for banks in 2008, these financial institutions have not received much sympathy from the American people.

While the banks and retailers hammer out a compromise, be on the lookout for credit card specific sales. As well, be cautious for increased prices on goods as this law goes into effect this coming October.