The Debit Interchange Cap in 2026: Regulation II, the Fed's Proposed Cut, and the Court Fight

Every debit card sale you take from a large bank's customer is priced by a federal rule. Regulation II, the Federal Reserve's rule under the Durbin Amendment, caps the interchange a covered issuer may receive at 21 cents plus 0.05% of the sale, plus one more cent if the issuer meets the Fed's fraud-prevention standards. That cap has not moved since October 1, 2011. Two things are now pushing on it at once: a Fed proposal from October 2023 to lower it, which has never been finalized, and a lawsuit in which a federal judge in North Dakota held the whole rule unlawful in August 2025. That ruling is on hold while the Eighth Circuit decides the Fed's appeal, argued in May 2026. A federal judge in Kentucky reached the opposite conclusion a month later, and that case is on appeal too.

As of late September 2026, none of this has changed a single rate on your statement. This guide sets out what the cap covers, what the proposal and the court cases would change, and what is worth doing while they are pending.

What Regulation II caps, and what it does not

The Durbin Amendment, section 1075 of the 2010 Dodd-Frank Act, requires that the interchange fee an issuer receives on a debit transaction be reasonable and proportional to the issuer's cost of that transaction. The statute tells the Fed to consider the incremental cost of the issuer's role in authorizing, clearing and settling a particular transaction, and not to consider other costs that are not specific to a particular transaction. The Fed turned that into a number in 2011, and the rule text today is still the one set then:

• A base component of 21 cents per transaction.
• An ad valorem component of 5 basis points, meaning 0.05% of the sale amount.
• A fraud-prevention adjustment of up to 1 cent for an issuer that maintains fraud-prevention policies meeting the Fed's standards and certifies that to its networks each year.

Three limits on that cap matter to a merchant more than the number itself.

First, it covers only large issuers. A bank that, together with its affiliates, has less than $10 billion in assets is exempt, as are government-administered payment programs and certain reloadable prepaid cards. A debit card from a community bank or most credit unions carries whatever interchange the network sets for exempt cards.

Second, it caps what the issuer receives, not what you pay. Interchange is one line of your processing cost. The network's own fees, your processor's markup, the high-risk registration fees the card brands charge, and any reserve are all outside Regulation II entirely.

Third, it applies to debit and prepaid cards only. Credit card interchange is not regulated by the Fed at all; that is the ground the Visa and Mastercard merchant settlement covers, and that is a separate matter.

Regulated and exempt debit, in real numbers

The difference between a regulated and an exempt debit card is large, and it is largest in exactly the transactions high-risk merchants run most: online, card-not-present sales.

The Fed publishes the average interchange actually paid on debit transactions every other year. In its 2024 data, the most recent it has released, the average fee on a covered transaction was 23 cents, or 0.47% of an average $48.95 sale. The average on an exempt transaction was 51 cents, or 1.21% of an average $42.27 sale. Exempt transactions were 39.3% of all debit transactions by count. The gap is almost entirely on the signature, or dual-message, networks: exempt transactions there averaged 61 cents against 22 cents for covered ones, while on the single-message PIN networks exempt transactions averaged 26 cents against 24.

Visa's published US interchange schedule, effective April 18, 2026, shows the same thing rate by rate. Every regulated Visa consumer debit category is priced at 0.05% plus 21 cents, plus the fraud-prevention cent where the issuer qualifies. The exempt card-not-present categories are priced as percentages: 1.65% plus 15 cents for e-commerce basic, 1.60% plus 15 cents for e-commerce preferred retail, and 1.90% plus 25 cents for the standard rate a transaction falls to when it does not qualify for anything better. On a $100 online sale that works out to:

• Regulated Visa debit card: 27 cents, including the fraud-prevention cent.
• Exempt Visa debit card, e-commerce basic: $1.80.
• Exempt Visa debit card, standard rate: $2.15.

Notice what that last line does not do on the regulated side. In Visa's schedule, a regulated debit transaction is priced at the cap whichever category it would otherwise fall into, so it does not get more expensive when it misses the data or security requirements of a better rate. On an exempt card, and on every credit card, those downgrades cost real money.

Routing: the part of Regulation II you can use now

The Durbin Amendment has a second half that gets less attention than the fee cap and that applies to every issuer, large or small. An issuer must enable each debit card on at least two unaffiliated networks, and neither issuers nor networks may stop a merchant from choosing which of those networks a transaction runs over. That is the legal basis for least-cost debit routing, in which your processor sends each debit transaction down the cheapest network the card supports.

When Regulation II was adopted, many debit networks could not process card-not-present transactions at all, partly because there was no widely deployed way to enter a PIN online, so an online merchant often had only one network to choose. The Fed closed that gap in a rule finalized on October 3, 2022 and effective July 1, 2023: the two-network requirement now expressly covers card-not-present transactions. The Fed was also explicit about the limit of that rule. An issuer has to enable two unaffiliated networks, but it is not required to guarantee that two will actually be available to your merchant account for every transaction. Whether you benefit depends on which networks your processor connects to and whether it routes on price for card-not-present debit.

The Fed's proposal to lower the cap

On October 25, 2023, the Fed's Board proposed to cut all three parts of the cap, on the basis that the costs large issuers report to it every other year have fallen significantly since 2009, the data year the original cap was built on. Under the proposal:

• The base component would fall from 21 cents to 14.4 cents.
• The ad valorem component would fall from 5 basis points to 4.
• The fraud-prevention adjustment would rise from 1 cent to 1.3 cents.
• The cap would then be recalculated every other year from the Fed's biennial survey of large issuers, rather than staying fixed.

On the same $100 online sale, a regulated card would pay about 19.7 cents instead of 27. The Board approved the proposal by a vote of 6 to 1; Governor Michelle Bowman dissented, warning that the lost interchange revenue would be felt at banks of all sizes. The comment period was extended from February 12 to May 12, 2024.

The Fed has not issued a final rule. The regulation text published in the electronic Code of Federal Regulations was last amended in October 2022, which is the card-not-present routing change, and still states the 21-cent cap. In December 2025, nine bank and credit union trade groups asked the Fed to withdraw the proposal while the courts decide. Until a final rule is published with an effective date, the 2023 numbers are a proposal and nothing more.

The court cases, and why they could push the cap lower still

The litigation began with a North Dakota truck stop and convenience store called Corner Post, which opened in 2018 and joined a lawsuit against the Fed over Regulation II in 2021. The first round was about whether it had sued too late. On July 1, 2024, the Supreme Court held 6 to 3 that a claim under the Administrative Procedure Act does not accrue until the plaintiff is injured by the agency's action, so a business that opened in 2018 could challenge a 2011 rule. The case went back to North Dakota on the merits.

On August 6, 2025, Judge Daniel Traynor of the District of North Dakota ruled for Corner Post. He held that the statute allows the Fed to count only the incremental cost of authorizing, clearing and settling a transaction, and that Regulation II unlawfully built four other kinds of cost into the cap: fixed authorization, clearance and settlement costs, transaction-monitoring costs, fraud losses, and network processing fees. He vacated the entire regulation, then stayed his own order pending appeal so that debit interchange would not become a completely unregulated market overnight. The Fed appealed to the Eighth Circuit, which heard argument on May 13, 2026. As of late September 2026 we could find no ruling.

On September 15, 2025, Judge Gregory Van Tatenhove of the Eastern District of Kentucky reached the opposite result in a similar challenge brought by Linney's Pizza, holding that Regulation II is not contrary to law and is not arbitrary or capricious. That decision is on appeal to the Sixth Circuit.

The two appeals could come out differently, which is the classic route back to the Supreme Court. What each outcome would mean for your costs is easier to state than when it will happen:

• If the Eighth Circuit reverses, Regulation II stands as it is, the 21-cent cap stays, and the Fed's 2023 proposal remains the live route to a lower one.
• If it affirms, the vacatur would take effect only once the stay is lifted, and the Fed would need a new cap built on the narrower set of costs the court allowed. Bank and credit union groups argued in their amicus briefs that it would force issuers to handle debit transactions at a loss. No one has published a figure, and we will not guess at one.
• Either way, exempt issuers are untouched. Nothing in either case changes interchange on a card from a bank under $10 billion, which on the Fed's numbers is the more expensive two-fifths of debit transactions.

What it means for a high-risk merchant

Interchange is a pass-through. On an interchange-plus account, a change to the regulated debit cap flows through to your statement like any other interchange change. On a tiered or flat-rate account, which many high-risk accounts are, it reaches you only if your processor chooses to pass it on. The proposal and the lawsuit are both, in the end, questions about a few cents per regulated debit transaction; whether those cents become yours depends on the pricing model you signed.

A high-risk account is expensive because of the acquirer's markup, the card brands' high-risk program fees, the rolling reserve and the cost of chargebacks, not because of the interchange on regulated debit, which is already among the cheapest card transactions you process. A merchant with a heavy debit mix and high volume has the most to gain from a lower cap; a merchant whose customers mostly pay by credit card will barely notice it.

What to do while the cap is in court

1. Find out how much of your volume is debit, and how much of that is regulated. An interchange-plus statement that itemizes interchange by category will show it, since the networks' own schedules price regulated debit separately.
2. Confirm your pricing model in writing. If you are on tiered or flat pricing, ask your processor how a change in the regulated debit cap would be reflected, and get the answer in writing before it matters.
3. Ask whether your processor routes card-not-present debit on price. Since July 1, 2023, cards must be enabled on two unaffiliated networks online as well as in store. If your processor does not route online debit to the cheaper network, that saving is available today, with no court ruling required.
4. Do not budget for a lower cap yet. The 14.4-cent figure is a proposal that has been pending for almost three years, and any post-litigation cap would need a new rulemaking first.

PayKings underwrites merchants that mainstream processors turn away, and prices accounts on what they actually cost to keep open. If the regulated debit cap changes, it will show on an interchange-plus account the way any interchange change does, and we will tell you plainly what it means for yours. Until a final rule or a final judgment says otherwise, the cap is 21 cents plus 0.05%, and the most useful debit question to ask your processor is how it routes.