Reports that retailers are saving billions of dollars as a result of the Durbin Amendment are neglecting to mention the higher prices that merchants who sell low-priced goods are now paying.
The rule, which was supposed to reduce the costs for merchants that accept debit cards, has increased the amount on processing bills for companies that used to pay a discounted price for debit card transactions less than roughly $10, WSJ.com reports.
In the past, credit card issuers used to give merchants discounts on debit card fees they paid on small transactions. The banking industry, however, has eliminated the discounts in order to recoup revenue it lost on the overall cap in interchange fees.
Jason Scherr, a Manhattan coffee shop owner, said he doesn’t like his options for handling the higher costs.
“My choice is to raise prices, discount for cash or get an ATM,” Sherr said, according to WSJ.com.
Other merchants in Sherr’s position are exploring similar options.
Redbox, a movie rental vending machine company, is raising its prices by 20 percent and Dairy Queen is suggesting that its franchisees display small placards that read “Due to the rising cost of payment card acceptance, we kindly ask you to pay with cash – especially for purchases under $10,” WSJ.com reports.
Merchants of all sizes lobbied hard for the Durbin Amendment, expecting to save big on the interchange fee cap. Many say that they are now forced to reassess the way they do business as a result of the consequences of the law.