Submitted by: John Chuff, Founder/Owner, Keystone Merchant Solutions LLC


On June 8, the Senate narrowly voted down a proposal that would have delayed cuts in debit card Interchange Fees recently enacted by the Federal Reserve as a result of the Durbin Amendment. The Durbin Amendment requires that cuts in debit card Interchanges Fees be implemented by July 21. According to the Federal Reserve, the average debit ticket size is $39 and its associated interchange fee is $0.44 or 1.14%.  Capping debit interchange fees to $0.12, as proposed by the Federal Reserve, should result in an average fee reduction of 73%.  Small banks with assets under $10 billion, however, are exempt from the legislation.

The Amendment ostensibly reduces the cost of doing business for the average merchant of both traditional and e-commerce, who accepts Debit/Check cards. In reality, the majority of merchants (estimated at 60%) will not automatically realize the economic benefits advocated by proponents of the Amendment. Most merchants have what is referred to as Tiered or Discount pricing arrangements with their Credit Card processor. E-commerce processors such as PayPal and Google Pay employ similar tiered pricing structures. The processor is under no obligation to pass along the mandated cut in the Interchange Rate.  Merchants with existing Interchange-Plus or Pass-Through pricing arrangements will see an automatic reduction in the processing costs associated with debit cards.

Keystone Merchant Solutions promotes Interchange Plus pricing. We believe it is the most transparent and cost effective pricing method in the industry. Most merchants may not be aware of what pricing method they have with their current processor. Part of Keystone’s value-added service is to review merchant service agreements and provide recommendations as to how to take full advantage of arguably the biggest change to the credit card industry in the past 15 years.