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Shoppers Unlikely To See Debit Card Discounts

Consumers will have to wait to see discounts on debit card purchases.

Retailers will reap billions of dollars in extra profits thanks to the lower transaction fees on debit cards. But don’t expect food or clothing prices to drop anytime soon.

Banks and retailers fought long and hard over debit card transaction fees. And retailers won. As of Saturday, new government regulations say stores must now pay far less to banks on debit card transactions. (Retailers must still pay higher fees on credit card transactions as they have more protections and rewards.) The ruling is a big boost for retailers and – in theory – for their customers who want to pay by debit cards.

However, The price of that 54-inch HDTV you had your eye on is unlikely to change. In fact, consumers may not see any savings at the checkout. Mallory Duncan, senior vice-president and general counsel at the National Retail Federation, says stores may offer free or lower-cost delivery on appliances, alterations on clothes or hire additional staff to improve customer service instead of price cuts. “Change won’t come overnight,” he says, “but consumers will definitely benefit.”

Others are not so sure. Those representing the financial industry say retailers have had quite enough time and suspect they will wait for the debit card fee story to blow over and quietly do nothing. Trish Wexler, a spokeswoman for the Electronic Payments Coalition, an advocacy group that represents banks and credit unions, says it’s time for big-name retailers need to roll out headline-grabbing price cuts. But, she adds, “I wouldn’t hold my breath.”

To be fair, some retailers are already offering lower prices. In 2002, the Swedish furniture giant Ikea began offering money-off coupons for customers on some purchases if they used debit cards instead of credit cards – which have a higher 2.5% swipe fee, according to, versus a cap of 21 cents per transaction on debit card purchases, plus 0.05% of the transaction. Before that, retailers were forced to pay 1%-2% of the transaction – or 44 cents on most small debit card purchases. (Mona Liss, a spokeswoman for Ikea, says it currently offers 1%-off coupons for debit card purchases.)

Duncan advises patience: “You will see a lot more three-foot signs over gas stations saying, ‘Money off for cash and debit-card purchases,’” he says.

Have you seen any debit card discounts yet?


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    • The article makes some good points. Other countries, namely Australia, have instituted these limits and it simply led to higher fees for consumers, not lower prices.

      The commenter above is incorrect. The idea that “interchange is only a portion of the total fees the merchant pays” ignores the fact that many merchants pay “interchange plus” pricing, where the merchant’s fee is directly derived from the interchange fee.

      As for the idea that these fee caps do not apply to small banks/credit unions, that is a myth that even Ben Bernanke exposed. Although the law allows the small banks to charge higher fees, the merchant acquirers do not have to agree to those fees, and in fact, any merchant acquirer who does agree to the higher fees for small banks would be at an immediate price disadvantage to rivals.

    • The fact is that someone has to pay for the debit infrastructure – the immediate authorization system, the fraud protection departments that work 24 hours a day and protect users even when some chose obvious PINSs or even write it on their card or have it on their wallet, for the no loss guarantee (because the losses are real and not always passed back to the merchant), etc.
      Until saturday the merchant paid, that is because to incite credit card adoption a long time ago that was the deal (as consumers are more likely to do impulse buys inf they do not need to go and get cash and the fee will be upsetting to them – and debit cards mostly ride on the same networks).
      So if the merchants do not want to anymore, and they got congress to act on their behalf then consumers or banks have to – and because at 21 basis points on the dollar many banks will not make enough (if not lose money) and will discontimnue it then it has to be consumers who get most of the benefit
      The entiore law is based on the erroneous premise prices will go down, and they won’t – WalMart will keep the savings, maybe gas stations wil try to foster more debit (but afte all how many people have enough cash on hand to buy a TV on a debit card).
      Why does congress has to get involved in a business issue between banks and businesses (especially if the big retailer and the big banks cafford all the lawyers they need) – the only thing that congress needed to do was tell MC/Visa that a merchant could accept debit and not credit cards and let each merchant decide what to do, aybelet a merchant charge a fee to a customer for a card payment (assuming they dared do it)
      Finally, theya also claimed debit was like cash so it should e free or almost free – someone please tell me then which number at the fed I call to get my money back if sokeone steals my wallet (because I can call my bank and get unauthorized charges taken off) – so they are clearly not equivalent. And cash is not free someobody has to pay to print all those bills (our taxes) and to transport it securely.

    • This article and the preceding comment are incorrect. Debit interchange was set by the Fed at 21 basis points (not 21 cents) but interchange is only a portion of the total fees the merchant pays, and this rate does not apply to cards issued by smaller banks/credit unions.

    • So the merchants got their debit card fees cut to 21 cents… but that means that customers will use credit cards instead and merchants will pay 1.5% to 3%. Congress gave them what they deserve, and consumers will pay for it.

About Pay Dirt

  • Pay Dirt examines the millions of consumer decisions Americans make every day: What to buy, how much to pay, whether to rave or complain. Lead written by Quentin Fottrell, the blog examines these interactions, providing readers with news, insight and tips on shopping, spending, customer service, and companies that do right – and wrong – by their customers. Send items, questions and comments to or tweet @SMPayDirt.