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Debit Card Fees Drop, Usage Rises

Posted On: 3/11/2013

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TAGS: cashless vending, vending, vending machine, Federal Reserve, debit card transactions, 2011 Interchange Fee Revenue, Covered Issuer Costs, interchange fees, 24¢ interchange fee, interchange decline, Dodd-Frank Wall Street Reform

WASHINGTON -- The Federal Reserve recently issued a report regarding interchange fees associated with debit card transactions. The update, entitled "2011 Interchange Fee Revenue, Covered Issuer Costs, and Covered Issuer and Merchant Fraud Losses Related to Debit Card Transactions," showed positive signs on all fronts when it comes to debit cards.

According to the Fed's calculations, interchange fees dropped to an average of 24¢ per transaction by the end of 2011, down from an average of 50¢ prior. The decline, according to the Fed, is due to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.

Interchange fees received by covered issuers dropped by more than half from an average of 50¢ per transaction (1.29% of transaction value) to 24¢ per transaction (0.60% of transaction value), according to the report.

"As 24¢ is the maximum interchange fee allowed for a covered issuer under the interchange fee standard for the average $39 transaction, assuming that the issuer is eligible for the 1¢ fraud-prevention adjustment, this suggests that most networks set interchange fees for covered issuers at the cap prescribed by Regulation II once the interchange fee standard took effect," the report read.

Additionally, payment card networks processed some 46.7 billion debit card transactions valued at $1.82 trillion in the United States during 2011. These numbers, estimated the Fed, represent a 24% increase in debit card volume and 27% jump in debit card value from 2009. Of those transactions, 63% were signature-based and 37% were PIN-based. Also, in 2011, prepaid cards represented 2.43 billion transactions, or about 5% of all debit card transactions, valued at $83.6 billion.

To view the report, click here.