1 Cent Charge on Debit Card: A Consumer's Guide

If you've ever noticed a 1 cent charge on your debit card statement, you're not alone. This small fee can be a mystery, but it's actually a common practice among banks and financial institutions.

These tiny charges are often referred to as "interchange fees" or "network fees." They're usually a result of your debit card being used for a transaction, and the bank takes a small percentage of the transaction amount as a fee.

In the US, the interchange fee is typically set at 1 cent per transaction, but it can vary depending on the bank and the type of transaction. Some banks may also charge a small convenience fee for using your debit card abroad.

These small fees may seem insignificant, but they can add up over time, especially if you use your debit card frequently.

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The average interchange fee for covered debit card transactions processed over single-message networks was $0.24 in 2019, according to a Federal Reserve report.

The Federal Reserve is considering revisions to Regulation II, which caps debit interchange fees at 21 cents plus 0.05% of the transaction, to make the fees more reasonable and proportional to the issuer's costs.

In 2019, the average per-transaction authorization, clearing, and settlement cost for covered issuers equaled $0.039, and the base interchange fee exceeded this cost for 78.6% of covered issuers and 99.4% of covered transactions.

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A $0.01 charge to a customer's card can be frustrating, especially if it's not clear why it's happening.

It's possible that an errant press of a custom amount on the keypad entry is causing the extra charge.

Square users have reported this issue, with one user noticing a $0.01 charge on two consecutive Saturdays.

The transaction amount was $130.01, with the extra penny added after the card was swiped, not before.

To investigate this issue, check the Transaction details first, as recommended by a user in the Seller Community.

If the issue persists, reach out directly to Square's Support Team for further assistance.

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The Federal Reserve is considering revisions to debit card interchange fees, with a meeting scheduled for October 25, 2023. This move could impact how much merchants pay for debit card transactions.

Large issuers with over $10 billion in assets are currently required to charge interchange fees that are "reasonable and proportional to the cost incurred by the issuer." This standard is outlined in Regulation II.

The current cap on interchange fees for large issuers is 21 cents plus 0.05% of the transaction. However, a 1 cent adjustment can be made if the issuer implements fraud-prevention standards.

In a 2019 report, the Federal Reserve found that the average interchange fee for covered transactions processed over single-message networks was $0.24. This is higher than the average per-transaction authorization, clearing, and settlement cost (ACS costs) for covered issuers.

The Federal Reserve may consider lowering the interchange cap to make fees more reasonable and proportional to issuer ACS costs. This change could be influenced by the pending debit card interchange lawsuit against the Federal Reserve.

Account security and fraud are a big concern for debit card users. The Federal Reserve Bank (FRB) has been monitoring fraud losses and has noticed a decline in the share of fraud losses absorbed by covered issuers between 2011 and 2021.

This decline is partly due to the introduction of increased security measures for in-person card payments, such as chip-based EMV cards and tokenization of authentication credentials. However, the FRB attributes increasingly more fraud to ecommerce and remote fraud.

The proposed ad valorem component of 4.0 basis points is the median ratio of issuer fraud losses to transaction value among covered issuers reported on the 2021 Debit Card Issuer Survey.

If you ever notice an unrecognized charge or order, it's essential to take action right away.

You'll need to contact the merchant or bank to verify the charge or order.

Unrecognized charges can be a sign of identity theft or account compromise.

Don't ignore the issue, as it can lead to further unauthorized transactions.

To protect your account, you should report the unrecognized charge or order immediately.

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The ad valorem component of the fee cap is determined by the median ratio of issuer fraud losses to transaction value among covered issuers, which is 4.0 basis points.

This number is based on the 2021 Debit Card Issuer Survey, and it's worth noting that the share of fraud losses absorbed by covered issuers has declined between 2011 and 2021.

The FRB attributes this decrease in part to the introduction of increased security for in-person card payments, such as chip-based EMV cards and tokenization of authentication credentials.

However, the FRB also notes that increasingly more fraud is attributed to ecommerce and remote fraud, which is a trend that's likely to continue as more transactions move online.

The proposed ad valorem component of 4.0 basis points is the median ratio of issuer fraud losses to transaction value among covered issuers reported on the 2021 Debit Card Issuer Survey.

This number is a key factor in determining the fee cap for issuers, and it's essential to understand how it's calculated to make informed decisions about account security and fraud prevention.

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