Credit Cards Blog

Finance Blogs » Credit Cards » New rules for debit interchange

New rules for debit interchange

By Leslie McFadden · Bankrate.com
Friday, December 17, 2010
Posted: 11 am ET

On Thursday, the Federal Reserve proposed new rules that would set standards for interchange fees that merchants pay to banks when consumers make purchases with their debit cards. The proposal would implement provisions in the Dodd-Frank Wall Street Reform and Consumer Protection Act.

The proposed rules, intended to set standards for determining whether a debit card interchange fee is "reasonable and proportional" to the cost of the transaction for the issuer, would apply to issuers that have assets of $10 billion or more.

The rules could limit interchange fees from 7 cents to 12 cents per transaction. According to a press release from the Federal Reserve, the proposed cap would reduce the maximum interchange fee that an issuer receives for debit card purchases by more than 70 percent compared to the 2009 average.

The rules are open for public comment through Feb. 22, 2011.

Higher costs to follow restrictions?

Bankers are warning that consumers will face negative consequences as a result. In a statement, Edward Yingling, president and CEO of the American Bankers Association, said the proposed rules "will have a dramatic impact on the cost of banking services for consumers nationwide."

A statement from the Independent Community Bankers of America echoed that cry, saying if implemented as proposed, "this rule will unquestionably lead to more consumer fees, fewer product choices and greater consumer confusion regarding card acceptance. As a result of the Durbin Amendment, the concept of ‘free checking’ is likely a thing of the past."

Currently, debit card purchases account for 35 percent of noncash transactions, according to the Federal Reserve.

Follow me on Twitter.

«
»
Bankrate wants to hear from you and encourages comments. We ask that you stay on topic, respect other people's opinions, and avoid profanity, offensive statements, and illegal content. Please keep in mind that we reserve the right to (but are not obligated to) edit or delete your comments. Please avoid posting private or confidential information, and also keep in mind that anything you post may be disclosed, published, transmitted or reused.

By submitting a post, you agree to be bound by Bankrate's terms of use. Please refer to Bankrate's privacy policy for more information regarding Bankrate's privacy practices.
3 Comments
p cha
December 18, 2010 at 12:27 am

Pay off credit card first. Why try to save earning less than 1% for most credit card interest rate are between 7-20%?