Yesterday Assistant Senate Majority Leader Dick Durbin (D-IL) announced that a compromise has been reached on his controversial proposal to regulate “interchange fees” – the fees merchants pay when they accept plastic. Now wait! Before your eyes glaze over and you click away, hold on. I'll explain how this may directly impact you, the plastic-toting consumer.

The background: Retailers are fed up with the fees they pay when their customers swipe their debit and credit cards. With few players in the industry and pretty restrictive merchant agreements, they often feel stuck with fees they believe should be lower. Empowered by millions of customer signatures gathered on petitions at 7-11 stores, they took their cause to Washington. Dick Durbin and other members of Congress felt their pain and passed a Senate amendment (attached to the pending financial regulatory reform bill) that would offer relief.

The card companies and banks (including some credit unions and community banks) stood to lose billions if that amendment became law. They fought back, preaching doom and gloom – and an end to free checking – if the measure passed. A compromise was hashed out and announced yesterday. It is still attached to the financial reform legislation, and must be debated, accepted, then passed with the financial reform bill, so it’s not a done deal yet.

Here’s what’s in the compromise:

Overall, the legislation will allow the Fed to regulate the interchange fees that banks charge businesses that accept debit cards to ensure they are “reasonable and proportional” to the costs involved. It doesn’t regulate the fees that the networks (such as Visa and MasterCard) charge the banks – as long as those fees are not used as a way to circumvent the regulation – and this doesn’t apply to credit cards. Exemptions were also carved out for government administered cards and prepaid debit cards.

In addition, merchants will be allowed to choose the debit network with the lowest cost – unlike the current system where merchants are forced to use a specific network. While this may not seem like a big deal to consumers, it will allow some merchants to cut their costs for these fees dramatically. Walmart could save an estimated $250 million a year, according to a Wall Street Journal story.

What this means for you:

Retailers say cutting these fees will mean lower prices at the cash register. I hope so, but I must confess I am skeptical. I am not convinced that when merchants save money on their expenses, consumers directly enjoy the benefits. But let's hope that's the case.

The naysayers warn that this change will mean skimpier debit card rewards programs, and the days of free checking for almost everyone may be numbered. That may also be true, but I am not convinced the sky is going to fall if this passes.

Other provisions:

Discounts for Cash: Merchants can’t be prevented from offering discounts for specific payment methods (cash vs. check vs. credit vs. debit) – as long as they don’t discriminate between one type of card versus another (no discounts for using a Discover card versus an American Express card, for example).

Minimum Purchase Restrictions: Right now, under the terms of their merchant agreements, businesses are generally not allowed to impose a minimum purchase requirement (i.e. $10 minimum when you pay by plastic). Under the compromise, merchants are allowed to set minimum purchase amounts of $10 or less on credit cards. (That amount may be increased if the Fed allows for it). From what I can tell, debit cards are exempt from this rule. So if you’re someone who normally uses a credit card for everything, make sure you always have $10 cash in your purse or wallet.

Note, this is based on my reading of Durbin's announcement -- I don't have the actual language in hand yet. If it changes, I'll post an update.

Gerri Detweiler – Personal finance author and Credit Advisor for Credit.com, Gerri contributes budgeting, debt recovery and savings information online. She is also the co-author of Debt Collection Answers: How to Use Debt Collection Laws to Protect Your Rights.