The Durbin Amendment’s cap on debit card interchange fees is set to go into effect on October 1 and after which the amount a merchant has to fork over to the bank every time a customer swipes for their purchase with a debit card will be 21 cents plus .05% of the overall transaction amount.
This means that merchants will see a higher profit margin on sales settled by debit rather than credit. Currently and up until that October 1st deadline, the Visa and MasterCard debit “swipe” fee online merchants pay is1.60% of the transaction amount plus 15 cents a transaction. When passing Durbin, the Fed made no distinction between online and face-to-face transactions. Therefore, after the first of October, it would be of great financial benefit for online retailers to encourage customers to pay by debit card.
According to a recent survey conducted by the website Internet Retailer, about 1 in 6 online retailers have plans to do exactly just that. 17% of respondents indicated their intentions to redesign their e-commerce sites to more prominently display debit card payment options or even offer discounts for debit card use.
Other strategies online merchants will employ to entice more customers into paying with debit cards is to inform shoppers that using a debit card for their payment method instead of a credit card will help keep overall prices low, increase buyer confidence in paying with debit by highlighting security policies and by making a charitable donation for every debit transaction.
Debit card usage has been increasing over the past year; most likely as a result of consumer unwillingness to rack up credit card debt in the midst of ongoing troubled economic times. According to the Internet Retailer survey:
‘Among survey respondents 40.2% report an increase in debit card use over the past year; 3.7% report no change, and 56.1% say it has remained the same.’
Many banks are implementing new debit card fees in an attempt to recoup some of the revenue loss that will result from the Durbin Amendment debit “swipe” fee cap, which may thwart retailers’ attempts to encourage more customer debit card usage. Wells Fargo is one of the big banks that will test a monthly $3 debit card fee in select states for consumers who use their debit card to pay for purchases, regardless of whether or not the charge is run as “credit” or “debit.