What the Durbin Amendment does

The Durbin Amendment is a federal law passed in 2010 that caps the fees banks can charge retailers when you swipe a debit card. It does not directly limit credit card fees — those remain set by individual card issuers and networks. The law applies only to debit transactions at the point of sale, not to credit card purchases, cash advances, or balance transfers.

The amendment was named after Senator Dick Durbin, who sponsored it as part of the Dodd-Frank Wall Street Reform Act. It set a ceiling on interchange fees — the per-transaction charges that Visa and Mastercard collect from merchants when customers use their cards. Before the law, these fees had no federal limit and were rising steadily.

For credit card users, the practical effect has been modest. Some banks responded to lower debit fee revenue by raising credit card annual fees or reducing rewards on certain cards. Others absorbed the cost without passing it to customers. The amendment itself does not set credit card fees, so your credit card terms depend on your card issuer's business decisions, not on Durbin.

Key Takeaways

  • The Durbin Amendment caps debit card interchange fees but does not regulate credit card fees, which remain set by individual banks and card networks.
  • Some banks raised credit card annual fees or reduced rewards after the law passed, though not all issuers made these changes.
  • The law applies only to debit transactions at merchants, not to credit purchases, cash advances, or balance transfers.
  • Credit card fees you pay — annual fees, late fees, foreign transaction fees — are determined by your card issuer's pricing, not by federal caps.

How the Durbin Amendment changed debit card costs

Before 2010, debit card interchange fees averaged around 0.5 to 1 percent of the transaction amount, with no legal limit. Retailers paid these fees to card networks and banks every time a customer swiped a debit card, and the costs were passed along in higher prices for goods and services.

The Durbin Amendment capped debit interchange at 0.05 percent of the transaction amount plus a fixed fee of up to 1 cent per transaction. This reduced what banks could collect from a typical debit purchase by roughly 50 to 80 percent. The Federal Reserve implemented the rule in October 2011.

Banks lost a significant revenue stream. In response, many introduced or raised monthly maintenance fees on checking accounts, reduced rewards on debit cards, or eliminated free checking altogether. Some banks exempted customers who met certain balance or direct-deposit requirements. The changes were not uniform — smaller banks and credit unions often kept debit terms unchanged.

Why credit card fees were not affected

The Durbin Amendment applied only to debit cards because Congress focused on the specific problem of rising debit interchange fees. Credit card interchange fees were not included in the law's scope, so they remained outside federal regulation.

Credit card networks — Visa, Mastercard, American Express, and Discover — set their own interchange rates, and these rates vary by card type, merchant category, and transaction method. A premium rewards credit card may carry interchange fees three times higher than a basic card, and these differences are legal under current law.

Banks and card networks argued that credit cards carry higher risk than debit cards because credit transactions involve lending and the possibility of default. Regulators accepted this distinction, and no subsequent law has capped credit card interchange fees the way Durbin capped debit fees.

How banks adjusted credit card offerings after Durbin

When debit fee revenue declined, banks had to choose how to offset the loss. Some raised credit card annual fees — particularly on premium cards with travel rewards or cash back. Others reduced the earning rate on rewards programs or eliminated free versions of cards that previously had no annual fee.

Not all banks made the same moves. Large issuers like Chase, Bank of America, and Citi raised fees on some products but kept others unchanged. Smaller banks and credit unions often made no changes to credit card terms. The variation reflects each bank's business strategy and customer base.

The relationship between Durbin and credit card fee changes is indirect. The law did not require banks to raise credit card fees — it straightforward reduced debit revenue, and banks chose to compensate by adjusting credit card pricing. A bank that relied more heavily on credit card revenue than debit revenue might have made smaller adjustments or none at all.

Credit card fees that remain under bank control

Your credit card issuer sets the following fees without federal caps:

  • Annual fees: Charged once per year, typically ranging from $0 to $500 or more on premium cards.
  • Late payment fees: Charged when you miss a payment important date, capped at $25 for a first violation and $35 for subsequent violations within six months under the CARD Act, but the CARD Act is separate from Durbin.
  • Foreign transaction fees: Charged for purchases made outside the United States, typically 1 to 3 percent of the transaction amount.
  • Cash advance fees: Charged when you withdraw cash using your credit card, usually 3 to 5 percent of the amount or a flat fee.
  • Balance transfer fees: Charged when you move a balance from one card to another, typically 3 to 5 percent.
  • Over-limit fees: Charged if you exceed your credit limit, though these are less common now and require your consent.

These fees are disclosed in your card's terms and conditions before you open the account. You can compare fees across cards when deciding which to use.

The difference between interchange fees and the fees you pay

Interchange fees are what merchants pay to card networks and banks — you do not see them on your statement. When you buy something with a credit card, the merchant pays an interchange fee to the card issuer, and that cost is often reflected in the price you pay.

Cardholder fees are charges the bank bills directly to you — annual fees, late fees, foreign transaction fees, and so on. These appear on your statement or billing notice. The Durbin Amendment does not regulate cardholder fees.

Durbin lowered interchange fees paid by merchants, which theoretically could have lowered prices in stores. Some retailers did pass savings along, but others kept prices the same. For credit card users, the law had little direct effect because credit card interchange fees were not included in the cap.

Frequently Asked Questions

Does the Durbin Amendment cap my credit card interest rate?

No. The Durbin Amendment does not regulate credit card interest rates or annual percentage rates (APRs). Your APR is set by your card issuer based on creditworthiness, market conditions, and the card's terms. Interest rates are regulated separately under the Truth in Lending Act and state usury laws, not by Durbin.

Will the Durbin Amendment ever be expanded to cover credit cards?

Congress would need to pass new legislation to cap credit card interchange fees. No such bill has been enacted. Some consumer advocates have proposed expanding Durbin to credit cards, but the credit card industry opposes this, and no expansion has occurred since the law passed in 2010.

Why do some credit cards have no annual fee while others charge $500?

Banks price cards based on the benefits and risk. A no-fee card generates revenue from interchange fees and interest charges. A premium card with travel rewards, concierge service, and high cash back earns higher interchange fees and justifies an annual fee. The bank decides the price based on what customers will pay and what competitors offer.

Can I avoid credit card fees by using a debit card instead?

Debit cards do not charge annual fees, foreign transaction fees, or cash advance fees because they draw directly from your account rather than extending credit. However, debit cards offer less fraud protection than credit cards and do not build credit history. The choice depends on your spending habits and financial goals, not just fee avoidance.

Did the Durbin Amendment lower prices in stores?

Retailers' costs for debit card processing fell significantly, but prices did not drop uniformly. Some stores passed savings along to customers through lower prices or promotions. Others kept prices the same and kept the savings as profit. There is no way to know how much of the fee reduction reached consumers versus staying with retailers.