Debit card acceptance — Durbin truth vs. myth

From: AL.com

By Cliff Parmer

Understanding credit card processing is very complex and can be confusing to many business owners.

Therefore, we felt obligated to shed some light on the recently passed — and also very confusing — Durbin Amendment, which was passed by Congress in 2010 in attempt to cap the fees associated with accepting debit cards.

At first glance, Durbin looks like a valid solution to lowering merchants’ costs on accepting debit cards as a form of payment by their customers.

Here are a few examples of often-confused myths:

MYTH: The Durbin Amendment applies to every debit card a merchant accepts at the time of sale.

FACT: The lower cost and cap only applies to debit cards issued by larger banks with $10 billion or more in assets. The Durbin cap on debit cards directly affects fees charged by the card brands — Visa, MasterCard, Discover, American Express, etc. — known as interchange, to a merchants’ credit card processor. There is no requirement that a processor pass that savings on to the merchant.

MYTH: The Durbin Amendment will lower a merchant’s debit card pricing.

FACT: Merchants placed on tiered pricing — qualified, mid-qualified, non-qualified — from their credit card processor may not see a reduction in their debit card acceptance costs. Merchants will benefit the most from a processor who passes the card brands cost through to the merchant.

MYTH: The Durbin Amendment lowers all merchants’ credit card acceptance costs.

FACT: Merchants with average debit card sales above $15 will see a reduction in debit card fees. Merchants with smaller average debit card sales below $12 will see an increase in debit card fees.

MYTH: Durbin only applies to debit transactions that require a personal identification number, or PIN.

FACT: Durbin applies to all debit (pin) and check card (signature) transactions from cards issued by regulated banks with $10 billion in assets.

MYTH: Retailers see the Durbin Amendment as a way to reduce the amount of bank charges.

FACT: With the reduction of bank revenue, banks are looking for alternative ways to make up the loss of revenue. Consumers could end up paying the price with increased fees.

Now is the time for business owners to find a processor who will educate their clients on credit card processing, who will equip them with the proper pricing structure and who has the capability to pass the savings on to you, the merchant.

Cliff Parmer is president of OmniTranz LLC, a credit card merchant services company that is a registered ISO/MSP of Wells Fargo Bank and Chase Paymentech Solutions LLC

Leave a Reply