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The truth about interchange fees

Limit has unintended consequences for debit card holders

[June 9, 2011]

After so much national economic turmoil, it makes sense that Americans would demand some changes in the rules governing big financial institutions.

But a portion of the Financial Services Reform Act approved last year makes no sense, once you understand the details. That's why many so many credit union members nationwide asked Congress to "stop, study and start over" with this one small but important part of the act. Ultimately, that effort failed, but we want you to know that we appreciate everyone's support!

The issue involves debit cards, and the fees that card issuers collect from merchants.

Here's how the system works: Consumers use debit cards, such as your free STCU CheckCard, to make purchases. Merchants get the benefit of immediate payments, without the risk of losses due to fraud or non-sufficient funds. Those risks are assumed by card issuers, which charge merchants a small "interchange" fee for each transaction.

The rules Congress approved last year disrupt that system by limiting the fee to 12 cents. That doesn't begin to cover the cost of providing this service to credit union members.

And since credit unions are not-for-profit cooperatives, anything that affects our ability to cover costs impacts each member.