Everything You Ever Wanted to Know About PIN Debit Interchange

To understand debit interchange, we have to start with the Durbin Amendment. The law caps the interchange rate that can be charged on PIN debit transactions at .05% and the transaction fee at 22 cents for card-issuing banks that have $10B in assets or more. You’ll see transactions subject to the Durbin Amendment referred to as “regulated.”

Important to note: the law dictates what the card brands can charge on debit, but not what the processors can. 

Let’s revisit the two types of debit transactions:
Online debit (pin is used): This forces the transaction to be routed through the debit networks instead of credit networks.
Offline/signature debit (no pin is used): Depending on which logo is on the card, the transaction will be routed through that card brand and interchange fees assessed.

A 22 cent transaction fee is high in the world of payments processing. Now let’s consider what that effective rate looks like on a low average ticket, let’s say $5. That’s 4.4%. So capping the rate with this transaction fee helps merchants with higher ticket sizes, but not lower ones.

💡 Merchants with a low average ticket size might do better accepting offline debit and credit transactions, while others will do better with online regulated debit.

But wait, how does a merchant know whether the card they are accepting is regulated by the Durbin Amendment or not? Are they going to ask the cardholder for their card and check the issuing bank against a book of rates they have nearby? Not likely.

There are also routing rules that dictate which debit network rails the transaction will travel on. Fees vary between the networks. Routing preferences can be set by the acquirer.

So to help your merchant, you should look at a history of their processing activity and decide their smartest card acceptance strategy. Do the big guys do that?  No. 

And now you know how to be a real-life payments hero.

You can learn more about PIN debit transactions by visiting this post.