When new laws decrease fees, you'd think most people would end up better off. Yet the much-ballyhooed new regulation on interchange fees may end up doing ordinary consumers more harm than good.

Earlier this month, the Senate added an amendment to the financial reform bill to limit the amount that credit card processors Visa (NYSE: V) and MasterCard (NYSE: MA) charge on debit card transactions. Some believe that similar limits on credit card transactions may be next. Although this has a fairly obvious impact on the companies that collect those fees, the real question is this: What will happen to the fee savings?

Collecting spare (inter)change
You'll never see an interchange fee when you're buying something, but it's a large part of what makes credit and debit cards profitable for the companies that issue and manage them. Every time you buy something with a card, the retailer you buy it from doesn't get the full amount of the charge. Visa and MasterCard collect an interchange fee of up to 2.95% plus a small fixed amount per transaction.

As fellow Fool Morgan Housel examined last week, Visa and MasterCard don't get a direct benefit from interchange fees. Instead, they're passed on to the banks that issue credit cards. So with Bank of America (NYSE: BAC), Wells Fargo (NYSE: WFC), and JPMorgan Chase (NYSE: JPM) being the market leaders in the debit card industry, they're the ones who will feel the brunt of new regulation. The reason Visa and MasterCard have seen their shares plummet has to do with the secondary impacts, such as the fear that lower interchange fees will reduce the incentives for banks to issue new cards, which in turn would impact the card networks' direct revenue sources.

But it's not the first time that interchange fees have been under attack. Big merchants Wal-Mart (NYSE: WMT) and Target (NYSE: TGT) have long fought the fees, arguing that they and other retailers should be allowed to bargain collectively to reduce the fees.

What it means for you
Lately, it seems like what's bad news for the banks should be good news for you. Yet it's far from clear whether ordinary consumers will benefit at all from the legislation.

For the most part, customers have never seen the direct impact of interchange fees. The agreements that merchants enter with Visa and MasterCard don't allow them to tack on interchange fees as a surcharge to customers, and although offering a discount for cash is permitted, cash discounts haven't really caught on outside of gas stations.

So just as card users never really suffered from interchange fees, they may never see any direct benefit from new limits on them. Some argue that by reducing their interchange fee expenses, retailers will be able to pass on savings through lower prices. But given how the charges were hidden from consumers in the first place, struggling businesses are more likely to keep the savings to boost profits or cut losses rather than passing them on.

In fact, if the changes are extended to credit card interchange fees, then some consumers could actually end up being worse off. Interchange fees help provide funding for the credit card rewards that so many people get from their cards. Yet as we've already seen during the financial crisis, falling bank profits have started eating away at issuers' willingness to continue rewards programs. With another source of revenue under attack, it's even more likely that customers will face annual fees and other direct costs to offset lost interchange fee income.

Get while the getting's good
For now, though, there are still plenty of ways that you can make the most of your credit and debit card spending. Although few if any rewards outweigh the cost of carrying a balance on a credit card, those who pay their bills in full every month can still end up ahead. Unfortunately, finding the best deals is probably going to start getting a lot harder.

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