Are Debit Cards Really More Costly for Merchants? Assessing Retailers' Costs and Benefits of Payment Instrument Acceptance

Abstract:     
Payment cards have been a perennial source of debate among economists. That debate received additional fodder in 2011 with passage of the Durbin Amendment, which targets debit card interchange fees. I assess the claim that the merchant side of the debit card payment platform has paid more than its “fair share” for debit transactions. I find no evidence to support the view that debit cards are more costly for merchants to accept than other payment instruments, like cash or check. To the contrary, when relevant incremental costs and benefits are included, debit cards are most often one of the cheapest payment instruments for retailers to accept.

Number of Pages in PDF File: 57

Keywords: Debit cards, Interchange fee, Dodd-Frank, Durbin Amendment

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