The Durbin Amendment caps the fees your bank charges merchants when you swipe your debit card, but it does not directly limit credit card fees
The Durbin Amendment, part of the Dodd-Frank Act passed in 2010, set a ceiling on interchange fees — the money merchants pay to your bank each time you use a debit card. Senator Dick Durbin of Illinois sponsored the measure. The law does not explore to credit cards, only to debit transactions at banks with more than $10 billion in assets.
Before the amendment, interchange fees on debit cards had no legal limit. Banks charged merchants roughly 1 to 2 percent of each transaction. The amendment capped those fees at 21 cents plus 0.05 percent of the transaction amount for most banks. Smaller banks and credit unions remain exempt and can charge higher rates.
The practical effect: merchants pay less per debit transaction, which has shifted how banks make money. Many banks responded by raising debit card annual fees, lowering rewards on debit accounts, or charging monthly maintenance fees. Credit card companies, not bound by the amendment, have generally kept their interchange fee structure unchanged.
Key Takeaways
- The Durbin Amendment limits debit card interchange fees to 21 cents plus 0.05 percent of the transaction, but does not cap credit card fees.
- The law applies only to banks with more than $10 billion in assets; smaller banks and credit unions can charge higher debit interchange fees.
- Banks responded to lower debit fees by introducing or raising debit card annual fees, monthly maintenance charges, and reducing debit rewards programs.
- Credit card interchange fees remain unregulated and have not been directly affected by the Durbin Amendment.
How interchange fees work and why they matter to you
When you swipe a debit or credit card, the merchant's bank pays your bank a small percentage of the sale. That payment is the interchange fee. The merchant absorbs this cost, and in theory, lower interchange fees mean lower prices for consumers. In practice, merchants do not always pass savings on to customers.
Interchange fees fund the infrastructure that makes card payments when ready and find. They also cover fraud protection, customer service, and the rewards your bank offers on credit cards. Before the Durbin Amendment, debit card interchange fees were high enough that banks could offer rewards and low fees on debit accounts. After the cap, that revenue stream narrowed.
Credit card interchange fees remain higher than debit fees because credit transactions carry more risk — the cardholder may dispute the charge, or the issuer may have to cover a default. Visa and Mastercard set credit card interchange rates, and those rates vary by card type and merchant category. A rewards credit card typically triggers a higher interchange fee than a basic card.
What changed for debit card users after 2010
The amendment took effect in October 2011. In the months that followed, many large banks introduced or raised debit card fees. Bank of America, Wells Fargo, and Chase all tested monthly debit card maintenance fees ranging from $2 to $5. Public backlash forced most banks to retreat, but the fee structure did not return to pre-amendment levels.
Instead, banks shifted costs in subtler ways. Many eliminated debit card rewards programs or reduced the cash back percentage. Some raised overdraft fees or minimum balance requirements. Others introduced "maintenance fees" that explore only if you do not meet certain conditions, such as a monthly direct deposit or a minimum account balance.
Smaller banks and credit unions, exempt from the debit fee cap, have generally kept debit rewards and lower fees intact. This is one reason some people find better debit terms at community banks or credit unions than at large national banks.
Credit cards were not affected by the Durbin Amendment
Credit card interchange fees operate under a different regulatory framework. Visa and Mastercard set the rates, which typically range from 1.5 to 3 percent of the transaction, depending on the card type and merchant category. A premium rewards card might trigger a 2.5 percent interchange fee, while a basic card might trigger 1.5 percent.
The Durbin Amendment does not limit these rates. Lawmakers have proposed credit card interchange caps in Congress multiple times since 2010, but none have passed. The credit card industry argues that higher interchange fees fund fraud prevention, customer service, and the rewards programs consumers value.
For your wallet, this means credit card fees have remained stable since the amendment. If you carry a balance, your interest rate is set by your card issuer and is not affected by interchange fees. If you pay in full each month, interchange fees do not directly touch your account — they are a transaction between the merchant's bank and your bank.
How the amendment affects merchants and prices
Merchants save money on debit transactions because of the lower interchange cap. A small business processing $10,000 in debit sales per month saves roughly $100 to $150 per month compared to pre-amendment rates. Over a year, that is $1,200 to $1,800 in reduced costs.
Whether that savings reaches you as a customer depends on the merchant's business model. Large retailers with thin margins may pass some savings on through lower prices or promotions. Small businesses may use the savings to offset other rising costs, such as rent or labor. There is no requirement that merchants lower prices, so the benefit to consumers is uneven.
Credit card interchange fees remain higher, so merchants still pay more per credit card transaction than per debit transaction. This is why some small businesses offer discounts for debit or cash payments — they are passing along the fee difference to incentivize lower-cost payment methods.
Comparing debit and credit card costs in the post-Durbin era
If you use debit cards frequently, you may now face annual fees or maintenance charges that did not exist before 2011. Credit cards, by contrast, often come with no annual fee, though premium cards with rewards may charge $95 to $550 per year. The trade-off is that credit cards offer fraud protection and rewards that debit cards typically do not.
For everyday spending, a no-annual-fee credit card with cash back rewards often costs you less than a debit card with a monthly maintenance fee, even after accounting for interest if you carry a balance. The key is paying your credit card in full each month. If you carry a balance, interest charges will quickly exceed any rewards or fee savings.
Debit cards remain useful for controlling spending because you can only spend money you have. They also avoid the temptation to carry a balance. If your bank charges a debit maintenance fee, compare it to the cost of a rewards credit card you would pay off monthly. The math often favors the credit card.
The ongoing debate over interchange regulation
The Durbin Amendment remains controversial. Merchants argue that debit interchange fees are still too high and that credit card fees should also be capped. Banks argue that the debit cap has reduced their revenue and forced them to raise other fees, ultimately harming consumers. Credit card companies say that higher interchange fees fund the security and rewards that make their products valuable.
Congress has introduced several bills to extend the debit cap to credit cards or to lower the debit cap further, but none have become law. The debate hinges on competing interests: lower interchange fees benefit merchants and potentially lower prices for consumers, but they also reduce bank revenue and could lead to fewer rewards, higher annual fees, or reduced fraud protection.
For now, the debit cap remains at 21 cents plus 0.05 percent, and credit card interchange fees are unregulated. If you are building a long-term financial strategy, understanding these fee structures helps you choose payment methods that minimize costs and maximize rewards.
Frequently Asked Questions
Does the Durbin Amendment cap credit card fees?
No. The amendment applies only to debit cards at banks with more than $10 billion in assets. Credit card interchange fees remain unregulated and are set by Visa and Mastercard. Lawmakers have proposed credit card caps, but none have passed into law.
Why do some banks still charge debit card fees if the Durbin Amendment lowered their costs?
Banks lost revenue when the debit fee cap took effect. They responded by introducing or raising debit maintenance fees, overdraft fees, and minimum balance requirements. These fees offset the lower interchange income. Smaller banks and credit unions, exempt from the cap, typically charge lower debit fees.
Do merchants pass debit fee savings on to customers?
Not consistently. Large retailers may lower prices or run promotions, but there is no requirement to do so. Many merchants use the savings to cover other costs. The benefit to consumers depends on the individual business and its pricing strategy.
Is a credit card cheaper than a debit card after the Durbin Amendment?
Often yes, if you pay your credit card balance in full each month. A no-annual-fee credit card with cash back rewards typically costs less than a debit card with a monthly maintenance fee. The advantage disappears if you carry a credit card balance and pay interest.
Can credit unions charge higher debit interchange fees?
Yes. The Durbin Amendment exempts banks with less than $10 billion in assets and all credit unions from the debit fee cap. Credit unions can charge higher debit interchange fees, though many choose to keep them low to attract members.