FTC FACTS for Business

FOR THE CONSUMER 1-877-FTC-HELP

ftc.gov FEDERAL TRADE COMMISSION

I f your business accepts payment by credit or debit card, some new rules of the road may help you lower your costs. The rules, part of the Dodd-Frank Wall Street Reform and 

Consumer Protection Act, deal with interchange fees for debit card transactions, the discounts 

on the purchase price you may offer your customers when they pay in certain ways, minimum 

dollar amounts for credit card purchases, and the networks available on a debit card for routing 

transactions. 

The New Rules

•	 Interchange Fees for Debit Cards. Beginning October 1, 2011, interchange fees for certain 

debit cards are capped at 21 cents plus 0.05% of the transaction value. If the issuer meets 

specific fraud prevention standards, the fee may go up a penny. The cap applies only to large 

issuers — banks and other card issuers with $10 billion or more in assets (including assets of 

affiliates). The Federal Reserve Board keeps a list of institutions exempt from the cap, available 

at www.federalreserve.gov/paymentsystems/debitfees.htm.

Which fees aren’t subject to the cap? 

 Credit card fees.

 Fees for debit cards issued by smaller issuers. 

 Fees associated with government benefit cards; with certain reloadable, general-use prepaid 

cards; with prepaid store cards; and with transactions at automated teller machines (ATMs). 

 Other fees charged to the merchant by the acquirer that may be included in the merchant 

discount.

New Rules on Electronic Payments

Lower Costs for Retailers
Facts for Business 2

The Players and The Process

Every payment card transaction involves:

3⁄4 the cardholder, who uses a debit or credit card to pay for a product or service.

3⁄4 the issuer, which provides a payment card to a cardholder and usually maintains 

the cardholder’s account.

3⁄4 the merchant, which provides the product or service for a price.

3⁄4 the acquirer, which provides payment card services to the merchant and maintains 

the merchant’s account. Sometimes, the merchant or the acquirer may use a thirdparty processor for certain processing services. 

3⁄4 the payment card network (PCN), which coordinates the information routing 

and money transfer between issuers and acquirers. PCNs may be debit card 

networks, credit card networks, or both. 

3⁄4 interchange transaction fees, which include fees established, charged, or 

received by a payment card network and paid by a merchant or an acquirer to 

compensate an issuer for its involvement in an electronic debit transaction.

Here’s how the players interact: 

A customer who wants to buy something presents his card to a merchant. The 

merchant generates an authorization request with a dollar amount and information 

from the customer’s card. The request is routed electronically along a path like this: 

Merchant  Acquirer (or Processor)  PCN  Issuer

The issuer gets the request, checks its file of active card accounts, and sends an 

electronic message authorizing or declining the transaction:

Issuer  PCN  Acquirer (or Processor)  Merchant

The authorization process usually takes seconds to complete. Then, the issuer 

posts a charge for the transaction to the customer’s account, and the acquirer posts 

a credit for the transaction, minus fees, to the merchant’s account. The amount 

deducted from the transaction value is known as the “merchant discount” and 

includes the interchange fee and other fees for processing the transaction.
Facts for Business 3

•	 Discounts to Customers. A PCN cannot stop 

you from offering your customers a discount 

or another incentive for using a certain method 

of payment, as long as you offer it to all your 

customers and disclose the offer clearly and 

conspicuously. For example, you can offer 

your customers a discount or a coupon if they 

pay with cash or a debit card rather than a 

credit card. But the new rules do not address 

other PCN restrictions that may prevent you 

from offering discounts or similar incentives 

that vary based on the use of a card from a 

particular issuer or a particular PCN. 

What’s new about that? In the past, PCNs may 

have prohibited you from offering a discount to a 

customer who used one kind of payment — say, 

a debit card — rather than another, like a credit 

card.

•	 Minimum Dollar Amount for Credit Card 

Purchases. A PCN cannot stop you from 

setting a minimum dollar amount for accepting 

credit cards for payment as long as the 

minimum is the same for all credit card issuers 

and PCNs, and isn’t more than $10. 

What’s new about that? PCNs sometimes 

prohibited merchants from refusing to accept a 

credit card as payment if the customer’s purchase 

didn’t exceed a certain amount. For example, 

if you accepted credit cards at all, the PCNs or 

banks might have said you had to accept a credit 

card for even the most minimal purchases. 

•	 Network Availability and Routing for Debit 

Card Transactions. Beginning October 1, 

2011, PCNs and issuers can no longer dictate 

the network you use for processing debit card 

transactions among the networks available 

on a debit card. You (or your acquirer) may 

choose to route debit card payments in a way 

that reduces your costs. For example, you 

could arrange with your acquirer to have 

payments routed over the network available for 

that card that has the lowest interchange fee. 

By April 2012, you must be given a choice 

of processing debit card payments through at 

least two different networks for most electronic 

debit transactions. Many issuers already offer a 

choice. 

What’s new about that? Sometimes PCNs and 

issuers have restricted the networks available to 

merchants for routing transactions. For example, 

some PCNs and issuers had arrangements in 

which a debit card could be used on only a single 

debit card network or a set of affiliated debit card 

networks. In addition, in the past, PCNs and 

issuers — not merchants or acquirers — generally 

specified the network that would be used to 

process a transaction when multiple networks 

were available on a card.

Talk to your acquirer or processor about how 

you can take advantage of lower debit card 

interchange fees. Go over your invoice together to 

see how these and other fees are reflected in your 

monthly statement, and discuss what you can do 

to reduce them. And shop around; you may find a 

better deal.

A recent Department of Justice settlement 

also changed Visa and MasterCard rules 

that prevented merchants from offering 

consumers certain discounts, rewards, and 

information about card costs. For more 

information, read the DOJ news release 

at www.justice.gov/atr/public/press_

releases/2010/262867.htm.
Facts for Business 4

September 2011

The FTC works to prevent fraudulent, deceptive, 

and unfair practices in the marketplace and 

to provide information to businesses to help 

them comply with the law. The FTC and other 

government agencies will enforce various 

provisions of the Dodd-Frank Act, including the 

new rules governing debit card interchange fees 

and routing. For example, the National Credit 

Union Administration is responsible for enforcing 

the rule with respect to federally insured credit 

unions; the Office of the Comptroller of the 

Currency is responsible with respect to national 

banks and federal thrifts; the Federal Reserve 

Board is responsible with respect to state member 

banks; and the Federal Deposit Insurance 

Corporation is responsible with respect to state 

nonmember banks and state-chartered thrifts. 

The Federal Trade Commission is responsible 

for enforcement with respect to other entities 

not covered by the above regulators. If you have 

questions about these rules or comments about 

how financial institutions are implementing them, 

contact the FTC at paymentcard@ftc.gov.

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