Regulated debit, and the one price break written into law.
A 2010 law capped debit interchange for cards issued by larger banks and exempted smaller ones. The result is that two debit cards can cost a merchant noticeably different amounts, and nothing on either card tells you which is which.
What this page settles.
Three questions, in the order most people ask them.
What the law actually did
The Durbin amendment, part of the Dodd-Frank Act of 2010, directed the Federal Reserve to regulate debit card interchange. Two things followed.
A cap on debit interchange for larger issuers. Banks above a stated asset threshold have the interchange on their debit cards limited by regulation rather than set commercially by the card networks.
Routing requirements. Debit cards must be enabled on more than one unaffiliated network, so the merchant side of a transaction has a choice about which one carries it. That is the basis of least-cost routing.
Smaller institutions — community banks and credit unions below the threshold — were exempted. Their debit interchange is still set commercially.
The intent was to reduce costs for merchants while protecting small banks. Whether it achieved what it set out to is argued about endlessly and is not really a merchant’s problem. What matters practically is the structure it left behind.
Regulated and exempt, in practice
You now have two kinds of debit card arriving at your till.
Regulated debit — issued by a large bank, capped. The cheapest transaction a US merchant can accept, by a clear margin.
Exempt debit — issued by a smaller institution, priced commercially. Cheaper than credit, but noticeably dearer than regulated debit.
Nothing on the card tells you which. The customer does not know. You cannot ask, and it would not help if you could.
The only place the difference appears is in the interchange detail on an itemized statement — which is to say, only if you are on interchange-plus. On a blended or flat rate the two are averaged into one number along with everything else, and the distinction simply disappears.
Why this is worth knowing
Not because you can act on it, but because it explains two things that otherwise look like someone’s fault.
Why your effective rate moves without your pricing changing. A month with more exempt debit costs more. Nobody did anything.
Why two similar businesses pay differently. A business in an area served largely by credit unions sees more exempt debit than one in a city centre dominated by large national banks. Same pricing, different cost, no negotiation involved.
It also sharpens the argument about pricing models. The gap between regulated debit and a premium credit card is the widest spread in US card acceptance. A single blended rate has to be priced across the whole of it. If your volume sits at the cheap end, you are paying for a spread you are not using.
The cheapest transaction you can take and the dearest one differ enormously. Any model that charges you one number for both is making a decision about you, and it is worth knowing which way it falls.
What has kept moving
Worth a plain caution, because this is an area where confident numbers age badly.
The cap level has been revisited by regulators since it was introduced, proposals to change it have been made and contested, and the treatment of related questions — routing on contactless and wallet transactions in particular — has continued to develop.
So: this page deliberately quotes no figure. Anything you read online with a specific number attached, including on sites that look authoritative, may be describing a position that has since changed. If the exact level matters to a decision you are making, check the Federal Reserve’s own current material and ask your acquirer what you are actually being charged.
Your own itemized statement remains the authoritative answer for what you paid.
What you can and cannot do
Cannot: choose which customers carry which cards, steer by card type, or negotiate interchange. The cap is the cap, and the exemption is the exemption.
Can: make sure the cheapness of regulated debit actually reaches you.
That is a single decision and it is the pricing model. Under pass-through pricing, a regulated debit tap costs you what regulated debit costs plus a stated markup. Under a bundled rate it costs you the average of your provider’s whole portfolio. For a debit-heavy merchant the difference between those two is usually larger than anything a salesperson will offer on a rate.
And check whether routing is available on your setup, which is the other half of what the same law created. Least-cost routing.
What we charge
Interchange + 0.50% + 10¢ in person, interchange + 0.75% + 25¢ keyed, interchange passed through at cost. A regulated debit transaction is billed at regulated debit interchange plus our markup — not averaged with anybody’s credit cards.
Send us a statement and we will show you how your debit volume splits between regulated and exempt, and what a bundled rate would be costing you on it.
While we are on the subject
Can I tell which debit cards are regulated?
Not by looking. There is nothing on the card. It depends on the size of the issuing institution, and you only see the effect afterwards in the interchange detail on an itemized statement.
Does the cap apply to credit cards?
No. It applies to debit only. Credit interchange is set commercially by the networks and is not capped.
Has the cap changed?
The level and its treatment have been the subject of regulatory proposals and litigation more than once since it was introduced. Treat any specific figure, including anything you read online, as something to verify rather than rely on.
Does this mean I should push customers toward debit?
You cannot steer customers by card type under card network rules. What you can do is make sure your pricing model lets the cheapness of debit actually reach you.