What the Durbin Amendment Means to Your Merchant Account
The Durbin Amendment is new legislation that reduces the interchange fees associated with debit card processing. According to the Federal Government, which uses a transaction amount of $38 as an average, the cost of processing a debit transaction will be reduced by nearly 50%.
So, the cost of processing a debit card transaction is being cut in half, this is great news for businesses accepting credit cards, right?
Well, not necessarily.
In order for a business to benefit from the reduced processing rates the business must be on an interchange plus pricing structure. With interchange plus pricing the actual cost (interchange) associated with each credit card transaction is passed directly to the business. With tiered pricing or ERR pricing the cost of the credit card transaction is fixed at a specific tier. So, when the interchange fees are lower for a debit transaction, but the tier price remains the same there is no savings associated with the transaction. However, the margin the processor is collecting has gone up.
So, the Durbin Amendment has reduced the cost associated with accepting credit cards for merchants or businesses that have interchange plus pricing. If you would like to benefit from the Durbin Amendment you need interchange plus pricing. Find out how to get interchange plus pricing!