Durbin Amendment: Limit Interchange Fees to 12 Cents

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The Durbin Amendment to the Dodd–Frank Wall Street Reform and Consumer Protection Act is set to be official in a little over a month. The amendment would have the Federal Reserve limit interchange fees on debit transactions, the fee a bank charges to process card transactions, to a mere 12 cents. It’s a proposal they put out for comment late last year and it’s drawn a lot of criticism. There are two alternative interchange fee standards:

  • Fee standard based on the costs with a safe harbor at 7 cents per transaction and a cap at 12 cents per transaction.
  • A standalone cap at 12 cents per transaction.

By the Fed’s own calcluation, this is 70% lower than the 2009 average and the rule is set to take effect on July 21st, 2011. In addition to putting this 12 cent hard cap, the regulation would prohibit an issuer from restricting on which networks the debit transaction could be processed

What does this mean for consumers? If the banks are to be believed and 12 cents is below the cost of doing business, banks will severely curtail the use of debit cards or find some other way to charge for the convenience of debit cards, which generates $16 billion a year. If you rely on your debit card, you may find that there will be new fees or restrictions associated with it if the banks are to recover some of this revenue.

{ 50 comments, please add your thoughts now! }

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50 Responses to “Durbin Amendment: Limit Interchange Fees to 12 Cents”

  1. MD says:

    I wonder if this means the end to Reward Checking accounts?

    • Kathie says:

      Yes. That’s exactly what it means. I just received confirmation of that in the mail. This sucks!

    • cosmogirl1002 says:

      Yep that’s exactly what that means. I bnk at chase and just got a letter today that says as of july 19, 2011 i will no longer receive reward points when I use my debit card as a credit card. This is a bunch of malarky to me. Just stop paying your execs millions a year. Give them a paycut to make up the difference or just eat it. The banks make too much money as it is. I’m ready to put all mu money in my safe and to hell with the banks.

      • karen hemerick says:

        We used to do that back in the day…We had envelopes set up for our bills and paid cash. Maybe we will go back to paying our bills in person!

  2. cubiclegeoff says:

    I’m sure this will cause a cut back in rewards checking accounts since they depend on the debit card purchases.

  3. zapeta says:

    Yeah, there goes our reward checking accounts. Also, I’ve seen that some banks have said they will limit debits to $50. That way if you want to buy $100, you’ve gotta run the transaction twice so they can get two fees.

    • Strebkr says:

      This might not be true for everyone, but sometimes people who can’t get credit cards rely on debit cards. If they can’t use their debit card for larger transactions then they are going to write checks??? It sounds like we are going back in time.

      • Vic says:

        Not to mention have to buy checks again. I still have my checks from back in college.

        • Strebkr says:

          I’m 27 years old and I still have checks from when I was in high school. They have my parents address on them AND the issing bank (Bank One) has been gone since summer of 2004. But the checks still work!

  4. skylog says:

    i am very interested to see how this is going to play out. i will hate to lose my few dollars in rewards for using my check card, for sure, but it is just so hard for me to believe the 50.00 limit on debits will happen.

    • karen hemerick says:

      To: Skylog, you will lose rewards on chase debit cards as of July, 2011. No printed info from Chase re: 50.00 limit.

  5. It really looks like this is going to force bank to recover the lost revenue in other ways, and those new ways may be less efficient than what is going on now. We can all agree that the current system of having a checking account and a debit card is pretty efficient for consumers. The bank doesn’t charge you anything and gives you a place to store your money, keep track of it, and gives you ways to use it (debit cards and checks). The reason they can do it for free is b/c they charge someone else. Now they may start charging consumers a little bit, but it probably won’t bee to bad.

    • Strebkr says:

      CHASE is doing a great job of making up for this by charging the crap out of everyone with new fees.

      • Shirley says:

        Tell me more! I use a Chase Freedom Card and haven’t been charged any fees yet, but would sure want to be forwarned.

        All I’ve had from them is $80 cashback so far this year.

        • Strebkr says:

          All of my Chase fees so far this year have been to my personal and business checking accounts with them. No changes to my Freedom card….yet.

  6. Holly says:

    There is a big discussion of this on another site I frequent. My peronal take is that businesses will have a FIT because their costs will increase dramatically:

    theft of cash-robbery or employee
    Check writing losses-Fraud & NSF
    cost/extra employees needed to handle cash
    cost/extra employees needed to keep checkout lines moving w/BUNCHES of check writers. I know I will walk out of any store if the line is >3 people.
    cost/extra employees needed to tally & handle depositing of checks
    cost/extra employees needed if shoppers break down orders and do multiple transactions. I have several banks and several debit cards.
    cost of doing multiple debit transactions for a single $200 + tax item

    Big business (gasoline, grocery, big box, Walmart, Target, CVS, WAG) are going to strenuously fight this. Just last week it cost me $33 to put 9 gal of gas in my car. I am SURE it will go to $4.50-$5/gal this summer. This will leave me a choice of filling 2x/in a week or just NOT filling up.

    I suspect, given 15 minutes I could think of more problems.

    • skylog says:

      i agree. i think that is part of the reason they are “floating” this idea out there. i simply can not imagine they will end up going through with it.

      that said, i bet this will eliminate any type of rewards from debit cards.

    • Kenn says:

      If what I’ve been reading can be trusted…it was several retail/business lobbies that pushed for the amendment. Their initial bottom line costs are going to go down dramatically. However, you’re correct the cost of doing business will go up eventually. Seems to be a case of “bottom line” NOW syndrome.

      • Ashley says:

        Even if merchants costs go way down, consumers will never see a difference in the price of goods. Merchants will laugh all the way to the bank. Consumers are so screwed. We aren’t going to discounts on our goods at stores and now we will be charged for our checking account and debit card.

  7. Courtney says:

    This actually won’t affect me – we hardly ever buy things with our debit card. I don’t even think of it as a debit card actually; I think of it as an ATM card since the only time I use it is to get cash. I use it for a purchase maybe once or twice a year at a pharmacy (<$5) if there are no ATMs around, to get cash back instead of paying fees to use another bank's ATMs.

  8. Strebkr says:

    I wonder what this will do to credit card programs. It might send more people the credit card way, but lately credit card companies have been cutting out people. Not sure how this will pan out for credit card reward users like me.

  9. Hal (GT) says:

    Well this in intriguing to me. Is it a play to get more people into or back into debt?

    I’ve been telling everyone I know that they need get out of debt and the fact that a lot of citizens have been focused on paying down that debt does have the credit card companies looking long term.

    Of course the answer is to carry cash or keep track of your credit card purchases and pay off the balance at the end of the month.

  10. frank says:

    This will be a mess. Banks are going to do much more than just eliminate the Rewards programs on debit cards. They are going to put a cap in how much you can spend per transaction. Limiting it to $50 – $100. Thats just ridiculous. Dont blame the banks. This will cost them $3 billion a year plus. Blame overregulation.

    The people that will get hit the worst is the low to middle income person who cannot afford to get bogged down with more and more fees.

    • Joe says:

      –This will cost them $3 billion a year plus—

      No, it doesn’t. The Durbin bill focuses on teh big ripoff that retailers have been forced to support-the big fees from all banks. Get rid of all the worthless programs designed to make you think the bank likes you but which businesses you buy from, actually pay, with the increased prices you pay so the retailer can maintain their margins. The bank pays nothing. This bill is similar to a bill written by the great US Senator, Paul Simon when ATMs were introduced. The bill disallowed banks for4m charging a fee higher than the real cost of an ATM transaction. That law still exists but few lawmakers have the political willpowes to have it enforced.

  11. govenar says:

    How is this supposed to help the consumer?

    • gmoonblade says:

      This really helps businesses out, because consumers don’t see the costs of doing business. Banks charge ridiculous fees to businesses for the privilege of letting consumers use their debit cards. If banks limit transactions to $50 then they are keeping you from accessing your money and then it is time to shop for a new bank. It only costs a few cents to process a debit transaction. American express is the worst, they charge businesses up to 5% for a transaction. That is why small businesses won’t accept AX. It cuts into sales too much. Banks have gotten too greedy. Now lets see which Senators they own.

  12. karen hemerick says:

    Chase has informed me that as July, 2011, using my debit card will no longer earn any “points” for rewards. No Fees, yet!! However, I have direct deposit of gov’t and pension checks so maybe(?) I won’t be charged any fees. If I am charged fees, I will switch to a credit union.

  13. larry says:

    lower credit card fees mean less bank profits. Decreased profits mean that the banks will have less money to loan to consumers and businesses. Without loans businesses cannot grow and cannot hire more employees.
    Durbin received monies from target, Walmart and other retail stores who wiil benefit from the bank’s pain.
    follow the money and you smell a rat or a Durbin

    • gmoonblade says:


      Banks are not lending, so who are you kidding. You either favor banks or businesses. As a small business owner, I certainly don’t like giving away percentages of my sales to banks. It isn’t just Walmart and Target that will benefit from this.

      • Kenn says:

        So you don’t mind bounced checks and the extra cost of collecting? You’re willing to give up (if debit cards get restricted) instant deposits to your bank account, with funds “verified”?

        The immediate cost savings per transaction will be eaten up by the cost of business in the long run. And if they aren’t….I highly doubt that retailers will be lowering their prices (which have been altered to cover transaction costs already)…therefore all this is doing is making banks subsidize the cost of business for the retailers.

        As far as the silly comment about banks not lending….tightening and not lending are two different things. Making sure the borrower is credit worthy is a good thing.

  14. redguru says:

    Ever consider taking your business to a credit union or community bank?

    Credit unions have much lower fees and are member-owned.

  15. Martin says:

    Many of these new laws make life more difficult on businesses and as a result the businesses try to make up for it at the customer’s exspense. Regulating businesses is only good to a certain extent, that’s why china is developing so fast; because they’re aren’t as much regulations on business but then again some employees if possible would expect you to work an 80 hour work week and only give 3.50/hr with 2011 inflation.

  16. Kermit says:

    I’d go with the community bank. Credit unions are essentially for-profit entities that don’t pay taxes. Not great corporate citizens in my book.

  17. B says:

    Rewards are fake. F.E. A 1% reward is 2% extra cost for a merchant to accept, passed on in higher prices for all (therefore only absorbed by those without rewards cards). So essentially rewards cards steal from the poor (those who typically don’t have rewards cards) and give to the more better-off. Leave it to the banks to have invented such sh*t.

    As someone in the processing industry with significant personal investment for this thing to fail, I can tell you the others who gain big are banks supplying processing (they surcharge merchants well beyond interchange for rewards cards by bumping them to the “non qualified” bucket of 3.5%++++) and independent sales offices of processors who make craploads of idle-rich monthly income for years taking a small percent of merchant’s income for their “services.”

    But this doesn’t involve any credit cards from the sounds of this vague article. Sounds like this doesn’t even affect check card processing (debit cards run without a pin) although I could be wrong. It sounds more like it deals with debit cards run with pin, which costs merchants in the form of “debit aquirer network” fees which charge as much as 1.1% + $.60 each transaction depending on the logos on the back of your debit card. Imagine that cost to a merchant on a $85 coffee you bought!

    From the sounds of things above, banks are trying to involve you all by threatening non-related benefits in other payment products just to increase stock prices (these are public companies- remember it’s not about gaining or losing but increasing gain) and involving you in their lobbying effort in the meantime.

  18. jb says:

    I guess this is to help small businesses, so they won’t need to pay as much to process electronic transactions. So no more insentives for consumers, all we have to look forward to are taxes from buying stuff and fees from the banks and still the same overprice items. I say the hell w/ small business, WALLMART here i come.

  19. Senthil Karuppiah says:

    For sure as a consumer we will end up sucking all the cost associated with using debit card. There will be no more rewards and most importantly the banks will start to charge us for using debit card. I simply don’t comprehend what that senator Durbin is doing to help us.

  20. Senthil Karuppiah says:

    The merchants already charge us for the transaction and interchange fee. It is something like what we pay for Gas today. If the merchant says $3.30 the day before and he says 3.50 today are you going to contradict with the merchant? May be, you will shop around or look for some cheapest gas station. Good luck, maybe you can find some which will ruin your engine.

    Expect this when Durbin amendment comes into effect.
    1. No rewards.
    2. Banks will start to charge us for any dispute call.
    3. Annual fee an all other indirect fee.. you know what it is.
    4. Debit card fee for every month.
    5. Min balance.
    6. Overdraft Fee (lot higher)

    You know what else!!

    Good luck 🙁

    • RS says:

      Did you know that if you dispute a charge the merchant is charged even if it is determined that the charge was valid?
      I agree with everything you said, I just thought you might like to know that small tidbit of information.

      • Chris says:

        Yes, but did you know that smart merchants build all that into their prices? So, if the Quik-E-Mart knows they are going to get a lot of $2 charges (which carry higher charges than big-ticket charges) then they are going to increase their overall prices accordingly.

        This is also why retailers, like Kohls, have moved to their own cards rather than favoring Visa/MC. With their own cards, they can take returns all day long and it doesn’t affect them from a transaction fee standpoint–and they can likewise offer lower prices.

  21. mike says:

    This Amendment sucks, we should all write to this idiot senator. No one likes this amendment.

  22. Daryl says:

    you guys don’t get it…nothing is free, the retailers have to pay this to the CC companies and then charge you a higher rate for whatever you just bought. Most retail businesses add in 3% for bank fees you consumers can get reward miles or some other type of kickback at 10% of what the Card companies are charging. This is one of the biggest scams on consumers and retailers!

    I know, I see both sides, I own retail businesses. It is like them getting a 3% royalty on everything sold, then, if the consumer does not pay in full, they get to charge some of the highest juice of anyone besides payday loans and the Mob. No offence to the Mob. if there even is a Mob.

  23. KC says:

    Quick question…should this ammendment pass, will you lower your retail prices by 3% the very next day or will it be the day after?

    I highly doubt any retailer out there will pass those savings on directly to the consumer, becasue it will be a boost to your bottom line. Therefore, we the consumers will actually be paying the same price for our items PLUS any new bank fees.

  24. RS says:

    I think that your question should be directed at the top ten retailers in the US. It would be nice to hear from them don’t you think?

    I personally would love to reduce my prices by the (proposed)savings of this amendment, but I don’t think that I’m going to see any savings. The next letters that are going out are the letters to retailers telling us that the settlement fees are going up and the statement fees (what a joke) are going up. This just increases my fixed costs without regard to volume. The credit card companies will get their money no matter what happens and in the end everyone loses except them.

    Here is what I find interesting:
    Chase has sent letters to their customers enrolled in the Ultimate Rewards programs informing us that we will no longer earn Ultimate Reward points, however you only earn Ultimate Reward points when the card is processed as a credit card, no pin. It is my understanding that the Federal Reserves limit on interchange fees is on debit transactions using a PIN (from what I’ve read so far it doesn’t say debit “card” transactions), so why is this impacting credit transactions using a debit card? Is the law defined as the type of card or the type of transaction? Are the banks using this as an excuse to limit rewards and other benefits? Good question for Chase I think.
    Why is it that every time the government gets involved that consumers and retailers are the end losers.
    I agree with B posted on 3/28/2011.
    The small ticket vendors sometimes lose money depending on the card used to make payment. A business (commercial) credit or debit card is like giving my products away.
    Now is a good time for every person to become familiar with merchant agreements and to understand the costs associated with using credit and debit cards.
    In closing, I do NOT believe that this amendment will help consumers or small to medium sized businesses. I believe that banks and credit card processors will implement plans to make up for lost revenue and possibly force small businesses from accepting credit cards as a form of payment. This just makes the large companies stronger and gives them the ability to fix consumer costs and choices. I have not even considered the impact on internet shopping. I also believe that the consumer will lose most if not all of the benefits of using plastic for their transactions.

  25. Christine says:

    When banks are faced with losing 300 million dollars of revenue annually, you can guarantee that they will have to make this loss up somewhere. The Government is only hurting the consumer with this ridiculous piece of legislation. Wave good bye to Free Student and Senior Citizen checking accounts. Seriously, charging grandma to have her checking account? Never in a million years would I of thought this possible, but it’s happening folks. The only ones that will benefit from this garbage law are large retailers like Wal-Mart. I am all for the free market, but when Government gets involved in regulating how the banks charge fees it only spells disaster for the consumer. Hurry up and pay back TARP bankers….get the government off of your back and let them concentrate on their own business the debt ceiling, Libya, gas prices on and on. Government has more important things to do, then regulating interchange fees. Come on…….

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