Toughey Talks
Durbin Debit
1st of October: Durbin Debit Day
September 29, 2011
October 1, 2011 is "D-Day" for debit cards. It’s the date that the new Federal Reserve Board cap for debit card interchange fees goes into effect. The debit card interchange fee will be capped at 22¢ plus 5 basis points (5¢ per $100). It should reduce the fee for a typical $1,000 tuition transaction from about $12.00 to just 72 cents. Learn more Three cheers for Senator Durbin!
But what the big print giveth, the fine print taketh away. Be aware of these "loopholes."
- Interchange Fees vs. Discount Fees
The Fed has capped debit interchange fees, but colleges and universities (and other merchants) don’t pay interchange fees. Schools pay discount fees charged by banks/processors (the middlemen who, in turn, pay the interchange fee). Unfortunately, there is nothing in Durbin that requires your bank to pass along savings to you. - Covered vs. Exempt Bankcard Issuers
The cap on interchange fees pertains only to cards issued by larger institutions, those whose assets exceed $10 billion. Transactions triggered by cards issued from smaller banks and credit unions are exempt from Durbin. For smaller financial institutions, it's business as usual. - Prepaid Debit Cards
The Fed's cap on interchange fees also does not pertain to certain prepaid debit cards. Prepaid cards issued for government benefits or Higher Education refund/student aid programs don’t fall under Durbin guidelines. Here, too, it’s business as usual. Promoting the use of such exempt cards on campus reduces your chances of lowering overall payment costs. - Low-Dollar Transactions May Cost More
Major card brands have recently suggested that they intend to charge the top amount allowed under Durbin, even on low-dollar transactions. The total cost for debit card transactions under $10 could actually be higher under the new card brand guidelines.
Your overall cost of processing debit cards should decrease significantly, but not as much as promoted in the press. Be proactive in talking to your bank/processor to understand the impact of Durbin on your campus. There’s work to do to maximize your savings opportunity.
Thanks for reading,
Dan Toughey
dan2e@touchnet.com
Toughey Talks
Durbin Debit
1st of October: Durbin Debit Day
September 29, 2011
October 1, 2011 is "D-Day" for debit cards. It’s the date that the new Federal Reserve Board cap for debit card interchange fees goes into effect. The debit card interchange fee will be capped at 22¢ plus 5 basis points (5¢ per $100). It should reduce the fee for a typical $1,000 tuition transaction from about $12.00 to just 72 cents. Learn more Three cheers for Senator Durbin!
But what the big print giveth, the fine print taketh away. Be aware of these "loopholes."
- Interchange Fees vs. Discount Fees
The Fed has capped debit interchange fees, but colleges and universities (and other merchants) don’t pay interchange fees. Schools pay discount fees charged by banks/processors (the middlemen who, in turn, pay the interchange fee). Unfortunately, there is nothing in Durbin that requires your bank to pass along savings to you. - Covered vs. Exempt Bankcard Issuers
The cap on interchange fees pertains only to cards issued by larger institutions, those whose assets exceed $10 billion. Transactions triggered by cards issued from smaller banks and credit unions are exempt from Durbin. For smaller financial institutions, it's business as usual. - Prepaid Debit Cards
The Fed's cap on interchange fees also does not pertain to certain prepaid debit cards. Prepaid cards issued for government benefits or Higher Education refund/student aid programs don’t fall under Durbin guidelines. Here, too, it’s business as usual. Promoting the use of such exempt cards on campus reduces your chances of lowering overall payment costs. - Low-Dollar Transactions May Cost More
Major card brands have recently suggested that they intend to charge the top amount allowed under Durbin, even on low-dollar transactions. The total cost for debit card transactions under $10 could actually be higher under the new card brand guidelines.
Your overall cost of processing debit cards should decrease significantly, but not as much as promoted in the press. Be proactive in talking to your bank/processor to understand the impact of Durbin on your campus. There’s work to do to maximize your savings opportunity.
Thanks for reading,
Dan Toughey
dan2e@touchnet.com