Debit Card Processing

A debit card is any card linked directly to a checking or  savings account. In June, as a last minute addition to the Dodd-Frank Wall Street Reform, the Federal Reserve was required to issue a ruling on the amount the Interchange fee amount that an issuing bank is allowed to charge when a merchants accept debit cards.  This ruling is commonly referred to as the Durbin Amendment.

Prior to this ruling, the average Interchange cost of a debit card was $0.44 per item.  As of October 1st, 2011 the Federal Reserve has regulated that cost down.  It now averages roughly $0.25* per item (some smaller banks are exempt from the cap on debit interchange).  Passing this amendment was an enormous victory for retailers throughout the country and a blow to the big banks.  It means that merchants will pay roughly $30 billion a year less to the banks.  The hope is that merchants will pass these savings on to consumers and stimulate the economy.

What does this mean to merchants?

Merchants on a pass through rate structure will pay roughly 50% less in fees associated with debit cards.  Our studies show that 51% of the transactions being processed in the United States are processed using a debit card.  So merchants and processors alike will see a significant reduction in Interchange fees?

Merchants on any rate structure other than Interchange Plus WILL NOT automatically receive this reduction in cost.  Just because the cost of processing debit has gone down doesn’t mean your existing processor is going to pass these savings on to you.  Check your statement or send it over to us for analysis. Make sure your receiving this reduction in fees. 

*The total paid per debit card transaction is now .05% + $.22 + $.01 for fraud prevention.  The $.25 average is based upon the overall average debit card sale across the country being $35.  True cost will vary slightly based on the actual size of the transaction you run.