Debit Interchange Fact Sheet

Debit Card Usage

• An average debit card is used to perform 17 purchases per month.
• 72 percent of consumers used a debit card, up from 65 percent a year earlier.
• 58 percent of debit transactions were for less than $20, up from 47 percent of transactions a year earlier.

Cost of Processing Debit Cards versus Other Payment Types

• For the consumer, merchant, bank and central bank, the cost of a non-verifiable check is 39 cents higher than a signature debit transaction.
• A merchant’s resource (includes costs such as processing, transport to bank, bank charges, other direct costs) costs for a $54.24 grocery store transaction was 16 cents higher for a check than a debit payment.

Customer Transaction Speed for Debit versus Other Payment Types

• On average, debit card transactions take 30 percent less time than check transactions.
• If all debit transactions were processed as checks than the average person would waste an hour per year waiting in lines.

Lost Revenue Resulting from the Fed Rule

• With a proposed interchange fee cap of 7 to 12 cents – an estimated $12-$14 billion in revenue could be lost.
• On average, large issuers get 44 cents per transaction in interchange revenue

Cost of Providing a Checking/Debit Account

• The cost of opening an account runs between $150 and $200
• The yearly cost of maintaining an account runs between $250 and $300
• About half of checking accounts are unprofitable in a “good year,” and with the coming regulatory changes that percentage could increase to 75 percent.

Fraud Losses

• The Federal Reserve’s proposal does not include the cost of fraud losses or fraud prevention.
• Debit card fraud losses to all parties was approximately $1.36 billion in 2009.
• Fraud losses represent 0.04 percent of an issuer’s transaction volume, but 9.4 percent of transaction value.
• Most common types of debit card fraud: counterfeit card, lost and stolen card fraud, card-not-present fraud.

Cost of Handling Checks vs. Debit

• Signature debit has the lowest social cost to parties involved in a transaction. The estimates below are based on a grocery store cash transaction of $54.24.
• The cost of a non-verifiable check is 39 cents higher than a signature debit transaction. However, the difference for a verifiable check and PIN debit is same – this is due to the interchange fee being included in the cost of PIN debit.

Payment Type Social Marginal Cost

Cash $2.66

Non-verifiable Check $1.40

Verifiable Check $1.08

Credit $1.22

Signature Debit $1.01

PIN Debit $1.08

A check transaction requires a merchant to spend 16 cents more on resources to clear a transaction than a debit transaction (for a grocery transaction of $54.24).

unit in cents

Cash $0.42

Check $0.31

Credit $0.24

Debit $0.17

Debit Card Reward Programs

58 percent of Issuers in 2009 offered some type of rewards program, up from 53 percent in 2008.

1 The Federal Reserve Debit Interchange Survey;
2 2010 Pulse Debit Issuer Study;
3 Javelin, "Credit Card Spending Declines", March 2009;
4 First Data White Paper, “Now You See It, Now You Don’t: A Review of Fraud Costs and Trends”. 2009.;
5 Estimate by Celent, a unit of Marsh & McLennan Cos, May 2010, as reported in the Wall Street Journal, June 17, 2010, “The End is Near For Free Checking.”
6 “Banking Strategies: Retail Delivery Insights Special Edition,” March 11, 2009, BAI;
7 AEI-Brookings Joint Center fro Regulatory Studies, “The Economics of a Cashless Society: An Analysis of the Cost and Benefits of the Payment Instruments”
8 Elizabeth Klee, “Paper or Plastic? The Effect of Time on Check and Debit Card Use in Grocery Store

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