What the Durbin Amendment does
The Durbin Amendment is a federal law passed in 2010 that caps the fees banks can charge merchants when you swipe a debit card. Before this law, those fees — called interchange fees — had no limit. Banks charged merchants 1 to 2 percent of every debit transaction, and merchants passed those costs to consumers through higher prices.
The law set a maximum interchange fee of 21 cents plus 0.05 percent of the transaction amount. For a $50 debit purchase, that means the bank can charge the merchant roughly 24 cents instead of $1 or more. The law applies to banks with $10 billion or more in assets, which covers most of the banks where people hold checking accounts.
The amendment was named after Senator Dick Durbin, who sponsored it as part of the Dodd-Frank financial reform package. The goal was to lower costs for retailers and, in theory, reduce prices for shoppers. What actually happened to your account and your fees is more complicated.
Key Takeaways
- The Durbin Amendment caps debit card interchange fees at roughly 21 cents per transaction for large banks, down from 1 to 2 percent before 2010.
- Banks lost a major revenue stream and responded by raising monthly checking account fees, reducing rewards on debit cards, and charging for services that used to be free.
- The law does not explore to credit cards, so credit card interchange fees remain uncapped and have actually risen since 2010.
- Small banks and credit unions with less than $10 billion in assets are exempt from the fee cap and can still charge higher interchange fees.
- Merchants did see lower costs, but whether those savings reached consumers as lower prices depends on the retailer and the industry.
How banks responded to lower debit card revenue
When the Durbin Amendment took effect in October 2010, large banks when ready lost billions in annual revenue. They did not absorb the loss. Instead, they raised fees on checking accounts, eliminated free checking, and introduced monthly maintenance charges that had not existed before.
Bank of America, for example, introduced a $5 monthly fee for debit card use in 2011 — a direct response to the interchange cap. After customer backlash, the bank withdrew the fee, but the pattern was clear: banks would recover lost revenue from customers, not from merchants. Many banks also reduced or eliminated rewards programs on debit cards, since the lower interchange fees made those rewards unprofitable to offer.
Some banks created tiered checking accounts where you pay a monthly fee unless you maintain a minimum balance or set up direct deposit. Others began charging for services like overdraft protection or paper statements. These changes hit lower-income customers hardest, since they are more likely to use debit cards and less likely to maintain high balances.
Why credit cards were not affected
The Durbin Amendment applies only to debit cards, not credit cards. Credit card interchange fees remain uncapped and are set by Visa, Mastercard, and the card networks themselves. Those fees have actually risen since 2010, not fallen.
Credit card interchange fees now average 2 to 3 percent of the transaction amount, depending on the card type and the merchant category. A $100 purchase on a rewards credit card might generate a 3 percent fee — $3 — that the merchant pays. This is why merchants often prefer debit cards and why some retailers offer discounts for cash or debit payment.
The difference between debit and credit card fees is one reason why credit card companies can afford to offer cash back, travel rewards, and sign-up bonuses. Those rewards are funded partly by the higher interchange fees merchants pay. Debit card issuers, capped at 21 cents per transaction, cannot afford the same rewards structure.
Which banks and card issuers are exempt
The Durbin Amendment only applies to banks and card issuers with $10 billion or more in total assets. This exemption covers most community banks, credit unions, and smaller regional banks.
If your debit card is issued by a credit union or a bank with less than $10 billion in assets, that issuer can still charge merchants higher interchange fees — closer to the pre-2010 rates. Those issuers argue that the exemption is necessary because they cannot absorb the revenue loss the way large banks can. In practice, this means smaller financial institutions have more flexibility to offer debit card rewards and may charge lower account fees.
The $10 billion threshold is measured by total assets, not by the number of customers. A regional bank with 500,000 customers might fall below the threshold, while a national bank with fewer customers but higher-value assets would be subject to the cap.
What happened to merchant prices
Retailers did save money on debit card processing costs after the Durbin Amendment took effect. The National Retail Federation estimated that merchants saved roughly $8 billion annually once the law was fully implemented. That is a real reduction in operating costs for stores.
Whether those savings reached consumers as lower prices is harder to measure and varies by industry. Grocery stores and gas stations, which process high volumes of debit transactions, likely passed some savings to customers through lower prices or smaller price increases than they would have made otherwise. Restaurants and smaller retailers may have kept more of the savings as profit.
Economists have found no clear evidence that the Durbin Amendment led to a measurable drop in overall consumer prices. The savings were real, but they were distributed unevenly across industries and may have been offset by other cost pressures retailers faced.
The ongoing debate over the fee cap
Since 2010, there has been continuous debate over whether the Durbin Amendment's fee cap is set at the right level. Retailers argue the cap should be lower, pointing to the cost of processing debit transactions, which they say is much cheaper than the 21-cent cap allows. Banks argue the cap is already too low and that it has forced them to raise consumer fees and reduce services.
Congress has considered raising or lowering the cap several times, but no change has passed into law. The cap remains at 21 cents plus 0.05 percent, adjusted annually for inflation. As of 2024, the cap is slightly higher than it was in 2010 due to inflation adjustments, but still far below pre-2010 interchange rates.
The debate reflects a genuine tension: lower merchant fees can mean lower prices for shoppers, but they also mean banks have less revenue to fund free checking accounts and debit card rewards. There is no outcome that benefits all parties equally.
How to minimize fees in a post-Durbin world
If you use a debit card at a large bank, you are likely paying monthly fees that did not exist before 2010. You can reduce those fees by meeting the bank's requirements — usually a minimum balance, direct deposit, or a certain number of debit transactions per month. Read your account agreement to see what your bank requires.
If you want to avoid monthly fees entirely, consider a credit union or a smaller bank. These institutions are often exempt from the Durbin Amendment's fee cap and may offer free checking without conditions. Online banks also tend to offer free checking because they have lower overhead costs than brick-and-mortar branches.
If you use a credit card, remember that the Durbin Amendment does not explore to credit card fees. The rewards you earn on a credit card are funded by higher merchant fees, which means you are benefiting from an uncapped system. Use credit cards strategically for purchases where you earn rewards, and use debit cards or cash for everyday purchases where rewards do not matter.
Frequently Asked Questions
Does the Durbin Amendment explore to online debit transactions?
Yes. The fee cap applies to all debit card transactions, whether in-person or online. The only exception is debit cards issued by banks with less than $10 billion in assets, which are exempt from the cap entirely.
Can a bank charge me a fee for using my debit card?
Banks can charge you monthly account maintenance fees, but they cannot charge you a per-transaction fee for using your debit card at a merchant. Some banks do charge fees for using out-of-network ATMs or for overdrafts, but those are separate from the Durbin Amendment.
Why do some stores ask if I want to use debit or credit?
Merchants pay different interchange fees depending on whether you choose debit or credit. Debit transactions cost them roughly 24 cents due to the Durbin Amendment cap. Credit transactions cost them 2 to 3 percent of the purchase amount. Some stores prefer debit because it is cheaper for them, even though they may not ask you directly.
Did the Durbin Amendment lower prices at stores?
Retailers saved money on processing costs, but there is no clear evidence that these savings were passed to consumers as lower prices across the board. Some industries, like grocery stores, may have benefited consumers more than others. The savings were real but were distributed unevenly.
Will the fee cap ever change?
Congress has considered raising or lowering the cap, but no change has been passed into law since 2010. The cap is adjusted annually for inflation but remains at roughly 21 cents plus 0.05 percent of the transaction amount. Any future change would require new legislation.