Named after Illinois Senator Dick Durbin, the Durbin Amendment was added to the Dodd-Frank Consumer Protection Act of 2010, and fully went into effect on April 1st, 2013. This act was intended to reform the interchange rates (known as “swipe fees”) of debit cards and credit cards. The new regulations are controversial, but have they done what they’ve intended? Has your business benefitted from the new regulations and have you successfully passed on your savings to your customers? Have you been more helped or harmed? Here’s some examples of each below.
Help: The lower debit card fees have signficantly been reduced. The swipe fees being reduced from 44 cents to 21 cents plus .05 percent of the transaction per transaction might mean a lower cost for your business, if the majority of your customers use debit cards. You’re allowed to use two different, independent, interchange networks. By having the choice to use different networks, you can decide on the most advantageous network for your business instead of being locked into one.
Your business is allowed to decide on a minimum purchase amount for credit card purchases, where before you were limited to a preset minimum purchase. Now you can adjust pricing for your specific needs.
The Durbin Amendment allows for tiered pricing with discounts for cash or debit cards. Want to reward your customers for lowering your costs and pass the savings onto them? You can.
Harm: The downsides are that more customers are using credit cards as their checking account fees go up. The banks are making up for the decrease in debit card fees by charging higher amounts on formerly free checking accounts. According to the Federal Reserve, credit card swipe fees are 65% of the interchange costs
Customers without cash for small purchases may forego buying anything to avoid the minimum payment. It goes without saying that any loss of business is a bad thing because even small losses add up over time.
A surcharge could decrease business . 81% of people would be less likely to shop at a store that has a credit card surcharge.
A minimum amount to use a credit card might also decrease business. 57% of people would leave the store without a purchase, and only 34% would buy additional items.