Are you seeing your “Durbin Dollars”?

Q: I understand that the cost to process my swiped Visa/Mastercard debit cards came down on October 1st because of the Durbin Amendment. How can I determine if I am getting the full reduction in those bank fees?

A: That is a great question, that requires some detail to answer. Let me walk you down a path to understanding how to determine if you are getting your share of the debit card cost reduction.

It is true that the federal government put a cap on debit card rates that took effect in October 1, 2011 because of the Durbin Amendment (Part of the Dodd-Frank Wall Street Reform and Consumer Protection Act) passed in Congress. This legislation has effectively dropped the cost of debit (either swiped or pin-based) by over 80 percent by the Federal Reserve.

That is obviously a massive savings opportunity for your business, and the largest drop in fees I have ever witnessed in my industry.

But the truth is the majority of merchants will not see much—if any—of that reduction. You’re probably asking how this could be, given the fact that this was an act of Congress. While it is a fact that the Durbin Amendment requires banks to lower the debit card fees they charge merchants, it DOES NOT require your credit card processor/bank to pass that reduction to you.

What you need now is an education on how to get your share of the Durbin Debit reduction.

Your October 2011 credit card statement will tell you if you are getting the debit reduction or not.

You probably just recently received your October 2011 credit card statement and that will speak volumes. That statement will reveal whether your bank/processor has decided to pass on the reduction to you, or keep it all as additional profit.

Let me walk you through four simple steps to determine whether or not you are seeing the “Durbin Dollars,” or the reduction in debit card fees, on your credit card statement.

Step 1: Open your October 2011 Visa/MC statement that just came in the mail. Let me point out that the massive reduction for debit cards is for both swiped Visa/MC debit cards as well as pin-based debit. Many retailers are under the false impression this reduction is just for pin-based debit. Not true. This covers all regulated Visa/MC swiped debit transactions which are cards issued by banks with over $10 billion in assets. (That is the majority of debit cards in circulation.)

“Non-regulated” debit cards are issued by banks with under $10 billion in assets and they were completely exempt from this legislation. The Interchange fees you are charged for those debit cards remain the same.

Step 2: Check your statement to see if it shows a section called “Summary of interchange fees,” which gives a detailed breakdown on all interchange categories, which is the wholesale cost of each card type you accept.

Warning: If you see “tiers” like qualifiedmid-qualified and non-qualified you are definitely NOT on an interchange plan, and have ZERO chance of seeing the full Durbin reduction. Those tiers are a red flag that you are severely overpaying for processing.

Step 3: If you do see an interchange category, check to see if “regulated debit interchange” (again, regulated debit cards are issued by banks with over $10 billion in assets) for Visa and MC is listed as the new, heavily reduced, .05% +.22 cents. Look hard for .05% +.22 cents! If it is not listed as such, you are not getting the full reduction in debit interchange passed to you.

Again, on October 1, the interchange rates for regulated debit cards were reduced to .05% +.22 cents from their previous debit rates that average 1.00% +.17 cents.

Did you get that? It dropped from 1.00% down to .05% on the rate component for debit cards. A massive drop. Now don’t let these numbers make your eyes glaze over. Please pay attention carefully as it will save you a lot of money.

For example, if you were on an interchange plan on October 1, on a $200 sale you would now pay 32 cents for swiped debit interchange instead of the $2.17 cents you now pay. That is a $1.85 cent savings on that one sale that you should be getting on debit. An 85% drop in fees!

But, as I stated earlier, the majority of merchants will not see any of that savings. They will pay the same exact high rates for debit rates as if nothing ever changed simply because the interchange savings are not being “passed-through.”

Step 4: If you don’t see the .05% +.22 cents anywhere on your statement, it is time to take action since you are not getting your fair share of debit reduction. This means that you are most likely on a tiered rate plan or a bill back plan; both have inflated surcharges.

As a recap from my previous articles, let me explain why the majority of merchants will not see their Durbin debit reduction on their October statement.

The reason they are not getting their fair share is that they are not on the same rate structure of the large chains, an interchange passthrough plan. Instead they are on antiquated rate plans that do not pass thru these benefits, the tiered rate plan, or a bill back plan. On a tiered rate plan debit card rates are locked in at a percentage and are not automatically reduced when there is a reduction of the underlying interchange percentage.

Tiered plans are easy to spot, but there is a faux interchange plan, called a bill back plan, that is more onerous than tiered plans in driving up fees. It is more deceptive because to the untrained eye, it looks like an interchange plan. For a full discussion of interchange plans, see my earlier article. And for an in-depth treatment of the cap on debit card interchange, see this article.

If you would like more information on how you can benefit from interchange passthrough plan, please email me at or visit us at