Home > 2011 > Credit Cards

The Durbin Amendment: Swipe Fees Impact On Credit and Credit Scores

Advertiser Disclosure Comments 5 Comments

The past year has seen quite a bit of focus and serious lobbying action in Washington regarding pending legislation under the Durbin amendment.  Among other things, this legislation affects the amount of money your bank receives from the retailer when you use your debit card to pay for the transaction.

Many consumers may be surprised to discover that, for example, the supermarket doesn’t keep the entire $20 you just paid for your groceries when you use your debit card for the purchase.  The supermarket pays the bank a fee (called a swipe fee) each time you use a debit card to pay for a purchase — $0.44 cents on average is paid to the debit card issuer.  When the Durbin amendment goes into effect in July 2011, that average fee is expected to drop to roughly $0.12 cents on average.

[Related Articles: The Durbin Amendment]

A couple cents drop may not sound like a big deal, but Americans use their debit cards to make a lot of purchases. A drop in swipe fee revenue from $0.44 to $0.12 (on average)  is estimated to cost the banking industry $12 billion a year in lost fee income.  What this means for consumers come July and beyond is currently unknown.

One possibility is that merchants will pass the savings on to consumers through lower prices.   Another option is that they won’t make any changes to their prices and pocket the savings themselves.  Most retailers have not shared what they plan to do with this extra savings and there are no rules in the legislation telling retailers what they must do with this incremental revenue.

Be ready as the days of free checking may soon be a distant memory as it is likely that banks will enact new checking and debit account features and fees in an attempt to make up for the $12 billion of lost annual revenue.

Will the Durbin amendment affect your credit report and credit score?

The good news — there is no direct impact on your traditional credit report/score as your checking and debit account information is not reported to the credit reporting agencies (Equifax, Experian and TransUnion).  There could be indirect impacts depending on how the enactment of this legislation causes you to change your mode of payment.  For example, if your bank imposes fees to use your debit card and you opt to pay for most purchases with your credit card instead, the incremental balances on your credit cards reported to the credit reporting agencies could make you appear more indebted – and thus potentially reduce your score.

Of course, paying with cash is another alternative and doing so won’t hurt your credit score.

[Resource: Get your free Credit Report Card]

Comments on articles and responses to those comments are not provided or commissioned by a bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by a bank advertiser. It is not a bank advertiser's responsibility to ensure all posts and/or questions are answered.

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

  • http://MSN Joanne Sandford

    I was over charged on facebook my deit card last four numbers 8085 $46.50

    • Deanna Templeton

      Hi Joanne – We’d love to help but when it comes to charges on a debit card, only the bank or the company that charged your card can address the issue. In this case, I’d contact both. Contact the company that overcharged you to dispute the charge and let them know you’re disputing the charge with your financial institution as well. Then contact your bank and let them know that you were over charged and they’ll be able to help and stop further charges.

      Also, be very careful about posting card numbers and account details online. In the wrong hands, an identity thief can do a lot of damage.

  • http://blog.wexlerwallace.com Jay

    Thanks for covering this issue – it seems like most consumers don’t even know that the swipe fee exists. Another consequence of a cap on swipe fees is that banks, with reduced revenue, could cut reward programs and possibly stop offering free checking accounts. It doesn’t seem like there are clear benefits for the consumer with this new reform. See more: http://blog.wexlerwallace.com/?p=953

  • http://blog.unibulmerchantservices.com M. S.

    The new debit limit benefits exclusively retailers, although their CEOs and lobbyists are telling us that consumers will be the ones who will reap the biggest advantage from the cap on debit fees. Any revenues lost by card issuers will translate directly into a positive revenue flow of an equal aggregate amount for retailers.

    It is very unlikely that any of the windfall will be passed on to consumers. Anyway, even if that did somehow happen, consumers would still be net losers, due to the fact that banks will inevitably make up for their interchange-related losses by generating higher revenues elsewhere. Actually, they are already doing it. http://blog.unibulmerchantservices.com/senate-hands-u-s-retailers-a-16b-win-over-card-issuers

  • Joe

    Okay. Tell me who was handed a monopoly by the Durbin amendment. The rumor out there is that a native American small company will benefit from the pass through fees. Who is it? It is alleged the Durbin amendment was challenged in court and was ruled legal.

Certain credit cards and other financial products mentioned in this and other articles on Credit.com News & Advice may also be offered through Credit.com product pages, and Credit.com will be compensated if our users apply for and ultimately sign up for any of these cards or products. However, this relationship does not result in any preferential editorial treatment.

Hello, Reader!

Thanks for checking out Credit.com. We hope you find the site and the journalism we produce useful. We wanted to take some time to tell you a bit about ourselves.

Our People

The Credit.com editorial team is staffed by a team of editors and reporters, each with many years of financial reporting experience. We’ve worked for places like the New York Times, American Banker, Frontline, TheStreet.com, Business Insider, ABC News, NBC News, CNBC and many others. We also employ a few freelancers and more than 50 contributors (these are typically subject matter experts from the worlds of finance, academia, politics, business and elsewhere).

Our Reporting

We take great pains to ensure that the articles, video and graphics you see on Credit.com are thoroughly reported and fact-checked. Each story is read by two separate editors, and we adhere to the highest editorial standards. We’re not perfect, however, and if you see something that you think is wrong, please email us at editorial team [at] credit [dot] com,

The Credit.com editorial team is committed to providing our readers and viewers with sound, well-reported and understandable information designed to inform and empower. We won’t tell you what to do. We will, however, do our best to explain the consequences of various actions, thereby arming you with the information you need to make decisions that are in your best interests. We also write about things relating to money and finance we think are interesting and want to share.

In addition to appearing on Credit.com, our articles are syndicated to dozens of other news sites. We have more than 100 partners, including MSN, ABC News, CBS News, Yahoo, Marketwatch, Scripps, Money Magazine and many others. This network operates similarly to the Associated Press or Reuters, except we focus almost exclusively on issues relating to personal finance. These are not advertorial or paid placements, rather we provide these articles to our partners in most cases for free. These relationships create more awareness of Credit.com in general and they result in more traffic to us as well.

Our Business Model

Credit.com’s journalism is largely supported by an e-commerce business model. Rather than rely on revenue from display ad impressions, Credit.com maintains a financial marketplace separate from its editorial pages. When someone navigates to those pages, and applies for a credit card, for example, Credit.com will get paid what is essentially a finder’s fee if that person ends up getting the card. That doesn’t mean, however, that our editorial decisions are informed by the products available in our marketplace. The editorial team chooses what to write about and how to write about it independently of the decisions and priorities of the business side of the company. In fact, we maintain a strict and important firewall between the editorial and business departments. Our mission as journalists is to serve the reader, not the advertiser. In that sense, we are no different from any other news organization that is supported by ad revenue.

Visitors to Credit.com are also able to register for a free Credit.com account, which gives them access to a tool called The Credit Report Card. This tool provides users with two free credit scores and a breakdown of the information in their Experian credit report, updated twice monthly. Again, this tool is entirely free, and we mention that frequently in our articles, because we think that it’s a good thing for users to have access to data like this. Separate from its educational value, there is also a business angle to the Credit Report Card. Registered users can be matched with products and services for which they are most likely to qualify. In other words, if you register and you find that your credit is less than stellar, Credit.com won’t recommend a high-end platinum credit card that requires an excellent credit score You’d likely get rejected, and that’s no good for you or Credit.com. You’d be no closer to getting a product you need, there’d be a wasted inquiry on your credit report, and Credit.com wouldn’t get paid. These are essentially what are commonly referred to as "targeted ads" in the world of the Internet. Despite all of this, however, even if you never apply for any product, the Credit Report Card will remain free, and none of this will impact how the editorial team reports on credit and credit scores.

Our Owners

Credit.com is owned by Progrexion Holdings Inc. which is the owner and administrator of a number of business related to credit and credit repair, including CreditRepair.com, and eFolks. In addition, Progrexion also provides services to Lexington Law Firm as a third party provider. Despite being owned by Progrexion, it is not the role of the Credit.com editorial team to advocate the use of the company’s other services. In articles, reporters may mention credit repair as an option, for example, but we’ll also be sure to note the various alternatives to that service. Furthermore, you may see ads for credit repair services on Credit.com, but the editorial team isn’t responsible for the creation or implementation of those ads, anymore than reporters for the New York Times or Washington Post are responsible for the ads on their sites.

Your Stories

Lastly, much of what we do is informed by our own experiences as well as the experiences of our readers. We want to tell your stories if you’re interested in sharing them. Please email us at story ideas [at] credit [dot] com with ideas or visit us on Facebook or Twitter.

Thanks for stopping by.

- The Credit.com Editorial Team