I’ve had an ATM card for my checking account since I opened it in 1990. For the past six years. I’ve also had a Mastercard debit card for the account. I use both from time to time for point of sale transactions. Having both cards has come in handy at times, like when the Mastercard was compromised by a restaurant and shut down and when one network or another is down. I also use take only one card sometimes when I might lose on and will need a backup (like for whitewater trips where my drybox might be lost.)
This afternoon, the ATM card quit working at a couple of stores. I went to my credit union and was told by a manager that due to “Section 2 of the Durbin Amendment”, I was not allowed to have both an ATM card and a Mastercard debit card for the account. He did mention a concern about liability but also said that the Durbin Amendment did not allow the use of two cards.
So here’s the two part question:
How does Durbin apply? If I understand the Amendment correctly , it has no direct bearing. It regulates interchange transaction fees, not card behavior. Where does it say otherwise? (For what it’s worth, Durbin also exempts issuers that are worth less than $10 billion, and the credit union is about one-sixteenth that size.)
On the far more practical level, what are some of the more common ways for someone to have two ways to make electronic withdrawals from their account. I would like to be able to buy groceries with both cards and also be able to go to an ATM and transfer funds.
Subsection (a) (which starts on page 1) limits the interchange which can be paid to a bank (or other financial institution) that issues debit cards. The term “interchange” is a banking term that in this context means the amount that the bank that issued the card is paid by the network for each transaction. It is often used incorrectly to mean the fee the merchant is charged for processing the transaction. The merchant is charged a fee (called the “merchant discount”) that is greater that the interchange because the merchant’s processor wants to make a profit, too.
Subsection (a) applies only to cards issued by institutions with $10 billion or less in assets. Consequently, almost all networks have instituted a two-level interchange schedule: One for banks with more than $10 billion in assets and one for banks with less than $10 billion in assets. The first one is generally the maximum allowed by law, the second is usually higher than the rates before the Durbin amendment was passed.
Now, merchants and banks have conflicting interests. Merchants would like to run debit card transactions through the network that charges the lowest fees (which usually means the network that pays the lowest interchange). Banks would like to have the transactions run through the network that pays them the highest interchange fees (which usually means the network that charges merchants the highest fees).
Banks sign up with networks. Cards can only be processed through the networks that the banks have signed up with. Merchants (or, more accurately, the merchants’ processors) choose which network to use. To maximize their profits, banks have given exclusive contracts to one network, thereby forcing the merchant to run the charge through that network.
Subsection (b) of the Durbin Amendment (starts on page 6 of the pdf file) requires banks to sign their debit cards up with at least two unrelated networks. The theory is that the networks will compete for the merchants’ business by driving down fees. There is no exception in subsection (b) for small banks.
It would appear that your credit union would rather turn off the POS (Point of Service) features of your ATM card than sign up your ATM card with a second network.
You could open a second account with a separate ATM card and link them together. Though you may have to link them in a certain way to maintain 2 cards.
I had a setup like this and it worked pretty well. All money would go into one high interest internet only account (when they had a high interest account), and automatically each month a amount would transfer to my local bank which would be used to cover bills for that month. each account had separate cards, in this case were different banks, but each could transfer to each other.