You may sometimes wonder if the payments industry has your best interest in mind. At PayJunction, we believe in ethical billing, as we’ve outlined in our ongoing unethical billing series. Our goal is to educate the business community about unfair billing practices.
In installment 16 of this series, we will expose how some payment providers are not passing on the savings Congress legislated to benefit businesses like yours.
The Interchange cost of any transaction is typically proportional to the level of risk associated with it. Since card-present debit transactions verify sufficient funds during the approval process, there is little risk involved. However, businesses were paying between 1% and 3% for these low-risk transactions, until 2010.
In July of that year, the Dodd-Frank Wall Street Reform and Consumer Protection Act was passed into law. The Durbin Amendment was part of the act and introduced regulation on debit interchange. Any debit transaction, including signature, PIN, card-present or card-not-present, is capped at $0.21 (plus $0.01 for fraud prevention, in some instances) plus $0.05. So, here’s the million dollar question: Is your business receiving the discount processing rate it was intended to get?
Payment Facilitators (e.g. PayPal, Square, Stripe) only offer Flat Rate pricing, which isn’t regulated like Interchange-plus pricing. This means that if you’re using a facilitator for your business’s credit card processing, you’re subject to overpaying debit card fees when you’re actually entitled to a fixed debit interchange cost. Let’s compare true debit interchange rates to the debit card fees Payment Facilitators charge:
True Debit Interchange
Debit Card Fees With a Payment Facilitator
That’s 12 times the true debit cost, what an astounding increase in fees! For $100,000 in debit transactions, a Payment Facilitator would charge $3,200 in fees. The true debit interchange should only cost $270.
The Dodd-Frank Wall Street Reform Act was supposed to pass these savings down to your business. Is your provider passing these savings on to you?
Do you accept a high number of debit cards and currently process with a Payment Facilitator? Tell us your estimated volume of debit card transactions and we’ll give you your estimated savings. Start a conversation thread below!