Home > Personal Finance > Debit Card Fee Changes: Winners and Losers

Comments 8 Comments
Advertiser Disclosure


Last summer, when Congress passed the financial reform bill, Washington’s finest had a specific order for the Federal Reserve.

Start chopping away at debit card interchange fees.

Those are the fees that credit card companies charge retailers when consumers swipe or wave their debit cards at the counter to buy a Slurpie at 7-11 or that tennis bracelet at Tiffany’s.

It’s big money for banks and credit card providers. According to Federal Reserve figures, the average interchange fee is pegged between .44 cents and .56 cents per transaction, or roughly 1.14% and 1.53% per transaction. Furthermore, interchange fees racked up around $16 billion for 2009, alone.

Those days are over – or they will be by next July. The Federal Reserve has two new proposals on the table. Both cap debit card interchange fees, one at .7 cents per transaction and the other at .12 cents per transaction. The Fed has put both proposals out for comment, with a February 20, 2011 deadline.

The Federal Reserve is expected to act on the proposals by July, 2011. Most political observers say either proposal will likely to pass after final review by the Fed.

The Federal Reserve proposal comes into play as debit card usage is skyrocketing. The Federal Reserve Bank of Philadelphia reports that the annual number of paper checks dropped from 40 billion in 2000 to 30 billion in 2006 – a trend the Fed says is accelerating. Simultaneously, the use of debit cards has risen each year by an average of 17%, from 2000 through 2008.

So, with billions of dollars on the table, who wins and who loses with the new debit card fee rules? Here’s a quick list:


  • Retailers and small businesses – Both industries come out way ahead on the new debt card fee caps. The Federal Reserve estimates that businesses which accept debit card payments will save 70%-and-90% (depending on what statistics you’re reading) on debit card fee charges once the new rules are in place.
  • Online businesses – Companies that sell goods and services via the Internet will make out, too. They’ll pay less in debit card fees, as well. For an industry that doesn’t accept cash, lower debit card fees is a huge windfall.
  • U.S. Consumers – For once, Main Street beats Wall Street in the financial regulations game. After watching fat cat bankers pocket tens of billions in taxpayer bailout cash, consumers should see lower prices at the checkout counter, as retailers pass on at least some of the debit card fee savings to the public. Consumers will also benefit from not having to use ATM machines – a fact of life at smaller retailers who set minimum amount purchase levels for debit card users. Those limits should go away once the rules are in place. A few potential downsides here. Banks may start charging customers to use debit cards to make up for lost revenue. They may also decide to curb or even end rewards programs linked to debit cards.


  • Banks – A common refrain in bank boardrooms these days is “ugh”. How else should bankers react from losing billions in debit card fees? Banks can try to convert customers to credit cards, with added incentives, but good luck with that. Data shows that consumers prefer debit cards over credit cards, and once they figure out goods and services cost less when they use debit cards, all bets are off.
  • Credit card providers – Debit cards are serious business to credit card giants like Visa and Mastercard – debit card fees are the fastest-growing part of their businesses. Visa, for example, earns about 20% of its total revenues from debit card fees. Investors certainly understood the ramifications of the Federal Reserve proposals after they were released. Stock prices in both companies dropped by 10% within 24 hours. There’s more bad news for the credit card giants. The Federal Reserve may also allow merchants to choose from at least two “independent” debit networks for routing transactions. That move would further cut into card company revenues.

  • Credit Unions – At least bigger banks can absorb curbs in debit fees. That’s not the case for credit unions – they actually spend a lot of cash administering debit card programs. Consumers may not think about it, but credit unions have to pay for add-ons like fraud protection, data-breach technologies, and card administration support costs. Not having the extra cash from debit card fees could cause credit unions to fall further behind banks from a competitive standpoint.

Chalk this one up as a win for consumers and small businesses–but a big loss for banks and credit card companies. The victor could be a pyrrhic one, though. Big financial institutions have a way of creating new ways to make money. Don’t be surprised to see new fees from banks and card companies down the road.

After all, there’s no getting between a big financial firm and its money.

Comments on articles and responses to those comments are not provided or commissioned by a bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by a bank advertiser. It is not a bank advertiser's responsibility to ensure all posts and/or questions are answered.

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

  • Ryan Eicher

    Its funny to me people decry the charges visa issues to use their product yet they still keep taking visas because of the marketing free of charge, namebrand recognition, etc

    sorry jerks, but the consumer doesn’t have to pay your fees, you do. Visa is on the side of the consumer when it comes to debit cards, you’ll take my .32 purchase and smile and thank me or you can stop taking visa altogether and close up shop.

    Consumers are being sold a whine story about merchant fees, so, how about next time a consumer is impacted by sales taxes, you lower your marked price to conver that its the same logic.

    If you want to dance with Visa, shes’s costly. Sorry, but you don’t get a romp in the sack and then the ability to talk bad about her the next day, the go back Jack and do it again everyday you reap a profit.

    There is zero justfication and honor in charging debit card minimums because thats the rules. The best way to offset your merchant cost is to stop being a merchant and go work for a call center.

  • Jim

    Anonymous, don’t be an idiot all your life. Visa and Mastercard take 2%-4% of every single transaction, and have become greedy bloated leeches. This will drastically improve the profitability of every business in America, which is a boost to the economy that’s badly needed.

  • Anonymous One

    The federal government and the fed also win, because this sets a mandate (if implemented) that would allow them to set the price and profit level of every business in America. Then they could take them over and profit from them in a monopolistic way. Already my bank is charging fees to offset their losses on this amendment. So all consumers end up holding the bag, and big box retailers end up with higher profits. That will also make the numbers look better for the economy and the government and the fed can say “it’s working” again. This legislation (Durbin Amendment) needs to be repealed if we have any chance of seeing free checking accounts and rewards programs ever again.

  • http://www.mavericknetworksolutions.com Jim Shanahan


    I beg to differ with O’Connell’s winners and losers, although not bad for an outsider..

    Consumers will NOT WIN because retailers will not reduce their prices 1.2%.. This is not just common sense to anyone who has ever been in retailing but also thoroughly documented in other countries such as Australia where interchange rates were reduced and retailers DID NOT reduce their fees.

    Furthermore, consumers will lose BIG as banks charge the consumer instead of the merchant as well as adding on fees to general checking to make up the difference.

    Finally, the BIG WINNER will be companies (banks and non-banks like GreenDot) that issue reloadable PREPAID debit cards that are EXEMPT from this price fixing. Smart operators will have an upper edge on traditional issuers of debit cards and by adding value in the forms of rewards and rebates will gain market share from banks who issued traditional debit cards.

  • http://www.mavericknetworksolutions.com Jim Shanahan

    I beg to differ with O’Connell’s winners and losers, although not bad for an outsider..

    Consumers will NOT WIN because retailers will not reduce their prices 1.2%.. This is not just common sense to anyone who has ever been in retailing but also thoroughly documneted in other contries such as Australia where interchange rates were reduced.BIG becuase banks will increse fees on debit cards and basic checking to make up for the lost revenue.

    Furthermore, consumers will lose BIG as banks charge the consumer instead of the merchant as well as adding on fees to general checking to make up the difference.

    Finally, the BIG WINNER will be companies (banks and non-banks like GreenDot) that issue reloadable PREPAID debit cards that are EXEMPT from.this price fixing. Smart operators will have an upper edge on tradtional issuers of debit cards and by adding value in the forms of rewards and rebates will gain makrhet share from banks who issued tradtional debit cards.

  • Pingback: Gab’s Marketing Blog » Blog Archive » Expect Even More Fees From Banks This Year - Wall Street Journal()

  • Pingback: Central Bank urged to curb credit card fees – Emirates 24/7 | Carte di Credito On Line()

  • lbf

    While I do not have the numbers, yes small locally based retailers will enjoy savings, but, in relation to giant national retail chains, the BIG GUY will enjoy very BIG savings that will could give them additional financial advantage over small locally based retailers. In the end the BIG retailers win at the expense of consumers, small home town retailers and small community banks and credit unions.

    So its very glaring that you fail to mention that BIG National/International retailers are the big winners. Makes me wonder…

  • Tommy

    Consumers will end up losing in this change!! Do you really believe that Merchants will pass those savings on to the consumer? Banks will also begin charging monthly fees for those with checking accounts, doing away with free checking. B of A, for example, is proposing a minimum fee of at least $9 a month. Not only are consumers not getting any savings from the small business owner, now they have to pay other fees to the bank to make up for it.

    PS- It is illegal to charge minimum fees on cards in the majority of industries. Merchants could potentially lose their Visa and Mastercard privelages or face fines from them. Unfortunately, the general public does not know this.

    • Frank

      It’s not illegal to set a minimum purchase it’s a part of the contract, but the new credit reform act will allow merchants to set a $10 minimum purchase.

Credit.com receives compensation for the financial products and services advertised on this site if our users apply for and sign up for any of them.

Hello, Reader!

Thanks for checking out Credit.com. We hope you find the site and the journalism we produce useful. We wanted to take some time to tell you a bit about ourselves.

Our People

The Credit.com editorial team is staffed by a team of editors and reporters, each with many years of financial reporting experience. We’ve worked for places like the New York Times, American Banker, Frontline, TheStreet.com, Business Insider, ABC News, NBC News, CNBC and many others. We also employ a few freelancers and more than 50 contributors (these are typically subject matter experts from the worlds of finance, academia, politics, business and elsewhere).

Our Reporting

We take great pains to ensure that the articles, video and graphics you see on Credit.com are thoroughly reported and fact-checked. Each story is read by two separate editors, and we adhere to the highest editorial standards. We’re not perfect, however, and if you see something that you think is wrong, please email us at editorial team [at] credit [dot] com,

The Credit.com editorial team is committed to providing our readers and viewers with sound, well-reported and understandable information designed to inform and empower. We won’t tell you what to do. We will, however, do our best to explain the consequences of various actions, thereby arming you with the information you need to make decisions that are in your best interests. We also write about things relating to money and finance we think are interesting and want to share.

In addition to appearing on Credit.com, our articles are syndicated to dozens of other news sites. We have more than 100 partners, including MSN, ABC News, CBS News, Yahoo, Marketwatch, Scripps, Money Magazine and many others. This network operates similarly to the Associated Press or Reuters, except we focus almost exclusively on issues relating to personal finance. These are not advertorial or paid placements, rather we provide these articles to our partners in most cases for free. These relationships create more awareness of Credit.com in general and they result in more traffic to us as well.

Our Business Model

Credit.com’s journalism is largely supported by an e-commerce business model. Rather than rely on revenue from display ad impressions, Credit.com maintains a financial marketplace separate from its editorial pages. When someone navigates to those pages, and applies for a credit card, for example, Credit.com will get paid what is essentially a finder’s fee if that person ends up getting the card. That doesn’t mean, however, that our editorial decisions are informed by the products available in our marketplace. The editorial team chooses what to write about and how to write about it independently of the decisions and priorities of the business side of the company. In fact, we maintain a strict and important firewall between the editorial and business departments. Our mission as journalists is to serve the reader, not the advertiser. In that sense, we are no different from any other news organization that is supported by ad revenue.

Visitors to Credit.com are also able to register for a free Credit.com account, which gives them access to a tool called The Credit Report Card. This tool provides users with two free credit scores and a breakdown of the information in their Experian credit report, updated twice monthly. Again, this tool is entirely free, and we mention that frequently in our articles, because we think that it’s a good thing for users to have access to data like this. Separate from its educational value, there is also a business angle to the Credit Report Card. Registered users can be matched with products and services for which they are most likely to qualify. In other words, if you register and you find that your credit is less than stellar, Credit.com won’t recommend a high-end platinum credit card that requires an excellent credit score You’d likely get rejected, and that’s no good for you or Credit.com. You’d be no closer to getting a product you need, there’d be a wasted inquiry on your credit report, and Credit.com wouldn’t get paid. These are essentially what are commonly referred to as "targeted ads" in the world of the Internet. Despite all of this, however, even if you never apply for any product, the Credit Report Card will remain free, and none of this will impact how the editorial team reports on credit and credit scores.

Your Stories

Lastly, much of what we do is informed by our own experiences as well as the experiences of our readers. We want to tell your stories if you’re interested in sharing them. Please email us at story ideas [at] credit [dot] com with ideas or visit us on Facebook or Twitter.

Thanks for stopping by.

- The Credit.com Editorial Team