The countdown to lower debit Interchange is on with only 11 short weeks remaining. The most important thing merchants can do now is switch to an Interchange plus pricing plan. Take a look at your current merchant statement. If you have a “qualified” rate or “non-qualified” transaction fees its time to act. No matter the size of your business or the industry you are in, it's easy to start processing on an Interchange pass through pricing plan by visiting MerchantRates.com.
October Debit Interchange Savings
Here we take a look at the current Visa and MasterCard charges for the processing of debit cards for retail, restaurant and ecommerce merchant categories to project possible savings for a range of transaction sizes from $10 to $75.
For example a merchant processing a $40 debit transaction today would pay a Visa Interchange fee of 0.95% + $0.20 with the math as follows: $40 x 0.95% = $0.38 + $0.20 = $0.58. Under the Fed’s Cap the math would look like this: $40 x 0.05% = $0.02 + $0.22 = $0.24. The savings is $0.58 - $0.24 = $0.34 as noted in the chart below.
* The final debit rate cap, as determined by the U.S. Federal Reserve Board on June 29, will be 21 cents per transaction, plus an additional 1-cent fraud charge, plus 5 basis points per transaction. PIN debit transactions are not represented in this analysis but are subject to the same Fed rate cap.
Another important point is that this Debit Interchange cap only impacts some debit cards and some debit card issuing banks. For example, small community banks and certain prepaid debit card issuers are exempt. We do not yet know how Visa and MasterCard will actually set rates in October, including how exempt debit cards will be priced. However, all indications suggest that the current debit rates shown above will be lowered as well so that the difference between exempt and non-exempt debit cards will not be as great as these calculations indicate.
Also of note is that other banking services may cost more with banks announcing steps to offset the revenue loss as a result of the government’s Interchange regulation, including changes to free checking and debit card rewards. Other bank strategies include ending debit card programs, moving customers to Interchange-exempt prepaid cards, limiting the use of debit cards by number of transactions or dollar volume, charging for debit card issuance or annual fees and charging merchants extra for payment guarantees and more. Over time we could expect to see more incentives for consumers to use charge cards and credit rewards products as banks try to steer consumers away from debit cards. Bottom line, banks have made it clear that they will attempt to make up for lost revenue in other ways. We will be monitoring these developments.