Merchant Advice for Debit Card Processing and the Durbin Amendment

The Credit Union Times reported late last month that there is indeed momentum growing for the delay of the debit card interchange cap portion of the Durbin Amendment (a provision of HR 4173).  Lots of pause legislation introduced and now out loud doubts by the likes of Federal Reserve Chairman Ben Bernanke and FDIC Chairman Sheila Bair, and others, about the ability of small debit card issuers to protect themselves against some negative impact.  

Folks - if there is a delay it will be announced shortly - (rules need to be proposed by the Fed this month) - we'll keep you posted.  I've discussed the issue at length here in the blog - winners, losers.   Lots of opinions on this and frankly, all remains to be seen.  In the mean time, we'd like our merchants to know what's happening, what they may and may not do and how to control costs.

What's happening?  While there is a frenzy to pause the cap implementation, your interests are being well represented.   Some of the largest retailers in the US as well as sizeable merchant coalitions and associations are lobbying congress for July implementation of the debit fee caps and the rest of the amendment, as is.  If you carry a debit rewards card for your business, or for personal use - your program has probably already been cut - like Wells Fargo, and others.  Possible other charges for previously free services, are being considered. The banks are looking to make up for pending lost debit card interchange revenue (There goes free checking!!).

Merchants!

You CAN offer a discount for cash, check and pin debit purchases and can encourage these alternative payment methods. 

You may NOT charge checkout fees for debit card use.

You may NOT yet require minimum purchase amounts for debit cards. 

See these common FAQ's and Guidelines from Visa and MasterCard.

Control your costs.

Use an electronic payments professional - and it's not your bank. Would you hire a plumber to wire your house?  What a source of confusion.  Banks do provide merchant services because they work with so many businesses. Banks also issue all credit and debit cards and are paid 100% of interchange, the revenue generated on every swipe, paid by...the merchant.  This is a self-serving relationship. Some of the most egregious processing statements we see are from banks.  Get your checking, savings, direct deposit, and loans - from your bank.  

Electronic payment processing is an industry UNTO ITSELF.  These professionals are paid a set service fee for delivery and risk (yes, banks charge this too). The fee includes risk and fraud protection, communications, underwriting, technology, recording, transfer of funds, guidance, set up, technology and development, etc.  They do not receive payment for interchange or assessments.

Focus on costs within your control - operating, human resources, inventory, etc. Types of cards presented at the register, interchange, assessments from Visa and Mastercard are not on this list.

Interchange Cost Plus pricing (wholesale) is now available to all merchants.  Ask for it.

Tiered Pricing if you insist - should include tiers specific to debit cards which is lower than credit cards.

For Pete's sake - Embrace the card and ring the till! Debit cards are the number one payment choice of consumers EVERYWHERE.  We will not be going back to cash - alternative electronic payment methods will never be free. 

Sure toss your hat into the legislative ring with a yay or nay but don't wait around for the federal government to solve the issues of of your small business.  Incorporate the cost of payment processing into your business plan, be lean, mean and efficient with it by understanding best practices and swipe, swipe, swipe.

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