If you’re trying to figure out how to accept debit cards as payment for your business, you might be pretty confused by all of the terms that are floating around without clear definitions. There are regulated debit, unregulated debit, card present, and card not present transactions, so it’s easy to see why it can be confusing. Although it can seem daunting to know all of the terms and rules that go with collecting payments through people’s debit cards, it’s actually easier than you think.

Regulated Vs. Unregulated Debit

The first thing that you need to understand is regulated debit vs. unregulated debit. In 2010, the Durbin Amendment defined regulated debit as any kind of debit that comes from a bank that has at least $10 billion in backup funds. Some of the major banks that have regulated debit include SunTrust, Bank of America, and Wells Fargo. In general, more banks are being added to that list every year, even though some banks might be occasionally taken off the list because their backup worth drops.

In contrast, unregulated debit is any debit that is backed by a bank that has less than $10 billion in backup assets. The next thing that you have to understand is how, with each type of debit transaction, these are assessed.

Key Differences with the Interchange Fee Structure

The fee structure with regulated debit is pretty straightforward. The Durbin Amendment states that the interchange cap is at $0.22 and 5% of the transaction amount. Additionally, it doesn’t matter if the card is present or the card is not present; it’ll be the same rate whether the transaction occurs online or in a physical store. As a result, when you’re working with Visa, Mastercard, or another major card network, it’s pretty simple.

Things can get tricky, though, when you start working with Independent Sales Organizations (ISO) and Member Service Providers (MSP). With many ISOs, the fee structure is tiered, which means that the merchant is charged according to the terms in the ISO’s contract. Consequently, you could pay much higher overall fees even though the Durbin Amendment puts the cap at $0.22 plus 5% of the total cost of the transaction. Another type of fee structure is the Interchange Plus Pricing, which is a structure in which merchants are charged a flat rate and markup that’s predetermined in the contract. This is a positive thing for merchants because it lets them know how much they’ll be charged instead of leaving things more open-ended.

Interchange Fees on Unregulated Debit

When someone pays with unregulated debit, the entire situation can become even more confusing and tricky. The interchange fees for unregulated debit can vary according to several variables. For instance, the merchant category code, transaction size, and other factors can all determine how much the merchant pays in fees. While there are some networks that have maximum fees in their contracts, this is not always the case. Sometimes, the caps on charges to merchants are only for negotiations between large merchant groups and card networks. So if you’re a smaller merchant, you might be missing out on savings that larger merchants are able to negotiate with card networks.

Getting the Best Rates

While your actual contracts will be fairly complicated, when you want to make sure that your business is paying the best rates, you need to find a merchant services company that wants to help you find the lowest rates so that your business can grow and thrive. At Payline, we help both large and small businesses understand their options and find solutions that save their business the most money.


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