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Some merchants still reluctant to steer customers toward debit
By Kathleen Winkler
As of Oct. 1, 2011, debit interchange rates are now capped at 21 cents per transaction, plus .05 percent of the transaction amount, drastically lowering the average size of debit card transaction fees that merchants have to pay. Retailers previously paid an average debit interchange of 1.6 percent plus 15 cents on a $78.70 transaction, or about $1.40, according to Javelin Strategy & Research, a global financial research firm. The new limits bring that fee down to approximately 25 cents -- a boon to cash-hungry retailers.
Surveys suggest that many retailers are still unaware of the recent debit card change. Others may be reluctant to influence how consumers pay. Only a relatively few will take steps to lower their costs by encouraging debit card payments over credit cards.
Here are a few more reasons why merchants may be reluctant to influence customers' payment choices.
Steering consumer preferences
Other steering mechanisms include:
A. Imposing credit minimums. Merchants have been allowed to set a minimum on credit card purchases of up to $10 per transaction. Setting minimums stops customers from charging very small amounts, but some merchants fear the practice may oblige customers to make additional purchases to meet the minimum requirements and could discourage sales.
Debit cards are not subject to minimums. However, some merchants are unaware of this and have been imposing minimums on debit as well as credit card purchases for some time. In the post-Durbin market, retailers who are unaware of the change could risk alienating customers as well.
B. Creating incentives. Some merchants have also begun offering discounts and other types of incentives to customers who choose cash or debit over credit. For example, the home funishings store IKEA offers consumers a 1 percent rebate that they can use toward their next purchase if they pay by debit card.
However, some merchants are concerned that their staff may not be able to readily distinguish between debit and credit cards, which tend to look similar, and this could cause confusion and delays at the cash register. In response to these concerns, the Retail Industry Leaders Association (RILA) recently proposed electronic and visual idenitifiers to help clerks readily differentiate between the types of cards. RILA has talked with Visa and MasterCard about introducing these services.
Card companies may steer their own course
Published: September 27, 2011