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National Restaurant Association - How the debit card fee cap affects restaurateurs

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How the debit card fee cap affects restaurateurs

Debit card swipe fees started to decrease for many merchants over the weekend.

A cap on debit card interchange fees, issued in June by the Federal Reserve, went into effect Saturday. It generally limits what large banks can charge merchants for accepting debit card transactions.

The rule applies to cards issued by regulated banks, or those with more than $15 billion in assets. About 600 banks are affected by the rule; the other 15,000 banks that issue debit cards have less than $10 billion in assets. Those 600 large banks, however, issue most payment cards.

What it means to operators
Many restaurants, especially those with higher tickets, will benefit from the rule. It limits swipe fees for cards issued by the largest banks at 22 cents plus 0.05 percent. Previously, the average interchange fee on debit card transactions was about 44 cents. The average savings is expected to be about $1,200 a year, Bob Carr, president and CEO of Heartland Payment Systems, said Sept. 29 in an National Restaurant Association webinar.

Restaurants with average tickets of $13 to $15 also will save money on interchange fees. Restaurants with average tickets under $11, however, likely will pay more in interchange fees, Carr acknowledged.

“Banks are trying to recover as much revenue as they can by legal means,” he said during the webinar.

Because of the cap, regulated banks can’t increase rates several times during the year, as they did before the law went into effect. But Visa and MasterCard can change fees for cards issued by non-regulated banks.

What the NRA is doing to help members
The NRA is a member of the Merchants Payment Coalition, which continues to fight for more fair, competitive and transparent interchange fees. The coalition includes restaurateurs and other retailers and will continue to work with Sen. Dick Durbin (D-Illinois) on making sure Congressional intent to reduce debit card interchange fees on all transactions is ultimately realized.

As a result of the law, the Federal Reserve must begin to publish annually a list of the fees by regulated and non-regulated banks. The coalition will closely analyze the rates to see how the fees affect merchants with smaller ticket averages.

The Federal Reserve decision to cap debit card interchange fees follows financial reform legislation enacted in July, 2010. The legislation includes a provision known as the Durbin Amendment, which the NRA and its Merchant Payment Coalition allies fought hard to pass. The amendment authorized the debit card swipe-fee cap.

Payment card companies and large banks continue to try to chip away at the Durbin Amendment.

The financial reform legislation also included provisions that applied only to credit cards. The law allowed merchants for the first time to set minimum limits for credit card transactions, up to $10. Merchants, however, can’t set transaction limits for debit cards. That includes purchases made by entering a security code, known as PIN debits, as well as those that require customer signatures.

The law also allowed merchants to give discounts for cash, checks, credit or debit card purchases.

NRA members can access the audio archive and presentation of the Sept. 29 webinar on the new cap on debit fees.

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