
The debit card fee driving US banks crazy - freeiris
http://www.theguardian.com/money/us-money-blog/2015/jan/27/us-credit-debit-card-fees-21-cents-durbin-amendment
======
dangrossman
This applies to debit cards when used online, too.

Say you charge 1000 customers using a Visa/MC debit card an average of $50 per
month each. Use a flat rate processor like Stripe/PayPal (2.9% + $0.30 per
transaction) and you'll pay $1750 a month in fees. The interchange rate would
only be $235 a month in fees. My merchant account provider charges 0.04% +
$0.10 over interchange as their markup, so that volume would cost $355 a
month. I have a few other fees to pay with that account, but they don't come
close to that 5X difference.

For my SaaS businesses, regulated debit is 26% of the card mix. Flat rate
processors are making a killing on their debit markup.

------
abalone
The flipside of this is most _processors_ have not updated their fee schedule
to pass on these savings to smaller merchants.

Square still charges 2.75% on debit cards. Stripe, 2.9% + $0.30. They are
making a _killing_ on debit cards.

If and when the processor market catches up with interchange regulations there
may be a material impact on these companies' revenue models. (Square is
already trying to diversify beyond basic processing.)

~~~
shawnee_
Yup.

[http://ink.hackeress.com/2014/12/crowdfunding-is-too-
expensi...](http://ink.hackeress.com/2014/12/crowdfunding-is-too-expensive-
payments.html)

Treating everything by default like it's a credit card transaction is _the_
glitch in the matrix... these companies are not "like" a cartel... they are a
cartel.

The screenshot in the article is from my friend's campaign to raise money for
her dog that got hit by a car in AK.. We surveyed everybody, and they all
donated with cash from their bank accounts (debit). Nobody put their donation
on a credit card. Nobody does that.

Somebody should do one of these graphics for The Oatmeal's Exploding Kitten
kickstarter campaign... Stripe has already made over $250K on this project
alone (more profitable than 95 percent of Kickstarter campaigns).

------
AlyssaRowan
I honestly had no idea US banks took the piss quite so much, but I did have a
vague idea that many still use cheques over there, EMV/chip-and-pin was barely
known and you often get charges levied on debit cards.

That really isn't the case in the UK, certainly, and I don't think it's normal
practice most other places - or am I wrong?

Is this actually _normal_ over there? Would it be practical to bank with a
bank based in another country?

I know everyone's going to roll their eyes, but how does this financially
compare to transfers via Bitcoin?

~~~
Someone1234
I've used both the UK and US.

Electronic payments in the US are painful and slow. They often don't work at
all on weekends, and certainly don't have the 2-3 hour speed of the "Faster
Payments" system in the UK (which is often borderline instant).

Banks actually intentionally make it a real pain in the butt to send money to
another bank, and stupidly easy to send money between accounts linked at the
same bank. Last time we needed to set that up it took almost an hour, because
of how they confusingly set up the UI and naming. Then the payment took a full
7 day week to arrive in the other party's account.

Plus in the US you have to have $1500 in a savings account (almost 0% interest
"savings") and pay in your pay cheque and jump through a million other hoops
just to get a free current (checking) account. So you'd assume the fees would
be lower and customer service better? NOPE. Fees are higher than the UK, and
CS is worse.

Everyone keeps saying "join USAA!" but unfortunately they closed the loophole
that allowed non-military to sign up for a checking account right before I
could. So no dice. Traditional banks are just horrible in the US, just awful,
it cannot be overstated.

~~~
adventured
You're incorrect about the cost of accounts. I can have $2 in my checking or
savings account, and there are no fees. I've never had a bank account that
cost me money to keep. I also don't have to jump through any hoops, I merely
walked into the bank and signed up for an account. Zero cost, zero hassle.

I'm also not sure what electronic payments you're referring to (transfers to
others?). I deposit money and it shows up instantly. I buy something from
Amazon.com via a Visa card attached to my checking account and it shows up
instantly on my account.

~~~
UrMomReadsHN
>I'm also not sure what electronic payments you're referring to (transfers to
others?)

I transfer money to and from my bank accounts using ACH transfers. It
typically takes a few days for those to clear.

------
kileywm
Summary:

-Card payment processing for major banks took a regulatory profit hit around 2010. Per transaction fees dropped from $0.44 to $0.21.

-The lost profit from transaction fees has simply shifted to more checking account fees for consumers from things like ATMs and minimum balance/direct deposit requirements to maintain a 'free' account.

------
rosser
Banking in America, summed up in one sentence: "In other words, the more you
need free checking, the less you are likely to get it."

~~~
dguaraglia
That's banking in America in general. In my experience, the moment I needed to
avoid having to pay fees (when I didn't have that much money on my bank
account) I would get slammed with fees left, right and center. Most of the
time I could get rid of the fee by talking to someone at the bank (Wells
Fargo), but most people wouldn't do that unless they really needed it.

Now that I have a decent income and a healthy account, I haven't been charge a
fee in years.

Basically, if you are poor you get screwed as much as possible.

------
DevX101
> the estimated $1.4bn worth of card transactions that Americans make annually

This article seems to be off by a factor of 1000 on this number. $1.4 billion
in debit card transaction for the U.S. doesn't pass the sanity check ($10 in
annual debit transactions per U.S. household??). Source below confirms the
number should be 1-2 trillion, not billion.

[http://www.marketwatch.com/story/us-2013-credit-and-debit-
ca...](http://www.marketwatch.com/story/us-2013-credit-and-debit-card-
purchases-increased-8-over-2012-2014-02-18)

~~~
Oletros
The Guardian is from UK, perhaps they are not using the American billion but
the one that means 1E12

------
omarchowdhury
'estimated $1.4bn worth of card transactions that Americans make annually.'

That's it?

~~~
elijahparker
Looks like that was supposed to be 1.4 trillion:
[http://www.statista.com/topics/1598/debit-
cards/](http://www.statista.com/topics/1598/debit-cards/) (from a comment on
the article)

~~~
BerislavLopac
It was actually both:
[http://en.wikipedia.org/wiki/Long_and_short_scales](http://en.wikipedia.org/wiki/Long_and_short_scales)

------
chisleu
Can anyone explain why the hell they need so much per transaction?

~~~
PeterisP
"Because they can" is the best explanation.

These fees do fund all the CC infrastructure (terminals, technology, cards,
servers, chargebacks, fraud compensations) and the benefits that card issuers
give to cardholders, but there's still a lot of space for profit. There's a
strong lock-in as most merchants really, really want to accept cards instead
of leaving the system, and little competition (the interchange is unified for
all banks), so it's almost like a cartel where the prices go down only when/if
forced by regulation.

~~~
seanmcdirmid
These are for debit, not credit transactions, so I don't think charge backs or
fraud apply.

~~~
PeterisP
Yes, credit cards "cost more" on fraud issues and that's why they get
different, higher interchange fees.

But in general it depends on the place - US has a strong legal difference
between fraud on debit and credit cards, but there still is some fraud
protection even for debit cards and in (for example) EU the consumer rights
for debit cards also includes chargebacks for unauthorised transactions and
compensation of losses with stolen/fraudulent credentials above a certain
level (100 EUR if I recall correctly); and banks still require a lot of
monitoring infrastructure and security people to reduce debit card fraud
simply because customer satisfaction requires that the fraudsters don't run
rampart.

~~~
seanmcdirmid
Banks in the US don't really care about credit card fraud "that much" since
the onus is on the merchant. Since debit cards require a PIN, the only fraud
that even comes up is cloning and PIN scraping via fake ATMs (chips might help
here, but they have these problems even in Europe, so I'm not certain).

~~~
otuutti
Know more about EU set up but the reality is that there is a lot of
infrastructure costs and some fraud as well (~4.04bsp @$101 average). So costs
for ~$2000 in fees can be up to ~$400. Signature cards are not secure whereas
EMV cards hit a 0.42bsp fraud rate ($148 average).

Of course still room for profit but the above numbers show why merchants are
interested in EU fees and security.

------
trias
I don't understand this market. In Germany all bank interactions are basically
free, you pay nothing (or little) for a bank account, everyone gets one (by
law), credit cards are free and if you're lucky you also get about 1% of
interest on your money. Why do american banks have to charge that much?

~~~
iopq
They charge this to merchants, not to the users.

~~~
vilmosi
Read the article again

~~~
iopq
It says retailers, not consumers

------
ForHackernews
Sign up for a rewards checking account and get some money back off the
interchange fees: [https://www.depositaccounts.com/checking/reward-checking-
acc...](https://www.depositaccounts.com/checking/reward-checking-
accounts.html)

------
iopq
You can sign up for a direct bank and have a free checking/savings account
with higher interest and no fees. They even pay ATM fees up to a certain
amount a month.

I still don't know why people have accounts at the big banks.

------
vilmosi
My first reaction was... The what fee?! Is this the Onion? Who charges debit
card fees?!

------
pc2g4d
Reads like an advertisement for Bitcoin....

------
theandrewbailey
Not sure where credit unions figure into all this. They haven't been evil to
me, even without hearing about what the big banks do. I'm not getting charged
any "account maintenance" fees anywhere.

