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

57 Pages Posted: 9 Sep 2011  

Anne Layne-Farrar

Charles River Associates; Northwestern University

Date Written: September 9, 2011

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.

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

Suggested Citation

Layne-Farrar, Anne, Are Debit Cards Really More Costly for Merchants? Assessing Retailers' Costs and Benefits of Payment Instrument Acceptance (September 9, 2011). Available at SSRN: https://ssrn.com/abstract=1924925 or http://dx.doi.org/10.2139/ssrn.1924925

Anne Layne-Farrar (Contact Author)

Charles River Associates ( email )

1 South Wacker Drive
Suite 3400
Chicago, IL 60606
United States
312-377-9238 (Phone)

HOME PAGE: http://www.crai.com

Northwestern University ( email )

2001 Sheridan Road
Evanston, IL 60208
United States

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