Retailers Reap Rewards of Debit Fee Cap

NEW YORK ( MainStreet) -- The Durbin Amendment is only 10 days old, but it seems like it's been around forever. This is especially true for banks, which have blamed the new debit card interchange fee rules for everything from lower revenues to the Phillies and Yankees being ousted from the baseball playoffs.

For the record, the Durbin Amendment, a provision in the Dodd-Frank financial reform bill, cut the fee banks can charge retailers for consumer debit card purchases. It took effect Oct. 1.
Merchants, not consumers, are reaping the benefits of the Dodd-Frank Act cap on debit fees.

Now, just over 10 days later, Princeton, N.J.-based Heartland Payment Systems provides the first look at just who exactly is making hay on the new debit card rules. the payment provider says swipe-fee reform has been an early Christmas present for retailers, saving them $1.8 million in debit interchange fees since the beginning of the month.

Restaurant owners were the chief beneficiaries -- they earned $671,652 of it. Heartland also estimates that the average merchant will save $1,000 on the Durbin Amendment during its first year. (That assumes retailers won't pass along any of those fee savings to customers in the form of lower prices.)

But some at Heartland say that retailers would do well to keep their hard-earned money, so banks, other payment processors and even customers will have to stay at arm's length. "These savings are just the tip of the iceberg," says Bob Baldwin, president at Heartland. "But 'Durbin dollars' should stay where they belong -- in merchants' bank accounts."

Of course, any revenue gained by merchants as a result of the Durbin rule means less revenue for banks -- the chief provider of debit cards. They used to get an average of 44 cents per debit card transaction, but the cap limited that to between 21 and 24 cents.

Now banks such as Bank of America ( BAC) and Wells Fargo ( WFC) are fighting back. Bank of America announced a $5 monthly fee for debit card users, while Wells Fargo is testing a $3 fee in select markets. When banks charge consumers $60 or so per year just to use a debit card, any savings on the merchant's end from lower debit card fees -- even if they're passed along to customers -- are largely erased.

Heartland is a pretty good barometer of debit card fee usage, as the payment firm has 250,000 locations across the U.S. From these initial numbers, it appears merchants are winning so far in the fight for scarce fee revenue.

Meanwhile, consumers are left wondering when they'll get their turn at bat, as usual.

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