t's been nearly three years since Wal-Mart and a group of fellow retailers took Visa and MasterCard to court over the bankcard associations' debit card policies. The threat of a legal stop action, however, hasn't deterred Visa from upping the ante for payments by debit card.

In June, the Visa board OK'd a plan to increase the interchange paid by merchant banks to issuers of Interlink, Visa's fledgling national online (PIN-based) debit product, for each POS transaction paid using an Interlink card.

Interchange is the basis upon which the merchant discount fee is determined. Under the current interchange fee structure, Interlink banks receive 0.45 percent of each sale initiated using cards they issued, plus 3 cents, up to a limit of 20 cents total, from merchant acquiring banks. In the case of supermarkets, interchange is a flat 15 cents per transaction. In October, the standard rate will rise to 0.65 percent of the sale total, plus 12 cents, not to exceed 45 cents, and the flat rate for supermarkets increases to 22 cents.

The industry scuttlebutt has it that Visa wants to prod the regional EFT networks into charging higher interchange fees for POS transactions routed through those networks. That, in turn, will close the gap between online and offline debit fees and diminish retailer resistance to accepting offline debit cards. Or so the reasoning goes.

Today, most online debit networks charge merchant acquirers between 10 cents and 20 cents for each POS debit processed. Offline debit cards are priced similarly to Visa and MasterCard branded credit cards: typically 1.25 percent of each sale plus 10 cents, or about 60 cents on a $40 purchase.

Known more popularly as "check cards," offline (or signature-based) debit cards look and act much the same as credit cards, but instead of charges against revolving credit accounts, check card transactions result in debits against cardholders' demand deposit accounts. DDAs are checking accounts and checking-like accounts (e.g., credit union share draft accounts).

Merchants like Wal-Mart complain that the fees for check cards should be substantially lower than the fees for credit cards. The risks associated with these transactions are much lower (and risk is one of the key components of interchange), they argue, because the transactions are posting against DDA balances, not against credit balances.

And they take issue with bankcard association rules that require merchants accepting Visa and MasterCard credit cards to also accept Visa and MasterCard check cards. They contend the take-all-cards policy runs afoul of federal antitrust laws, which say companies cannot tie acceptance of one product (in this case, offline debit cards) to acceptance of another product (credit cards) that already enjoys market dominance.

Check cards are a great idea, especially for consumers who like the convenience of credit cards but would rather not deal with the bookkeeping, interest and service charges that come with a revolving charge account. Consumers like my mother - a child of the Great Depression who prides herself on having never felt the burden of debt. (An amazing feat given that she and my father raised six kids between the 1950s and the 1980s.)

Several years ago I piqued Mom's interest when I showed her that my ATM card was also a "check card" and would work just like a credit card at the store we were shopping. A few months later, she walked into her local bank (at the time it was Fleet Bank) and asked the manager about getting a check card. Today, Mom whips out that check card with the speed and precision of a seasoned credit card user, when she's home and when she's traveling.

And she's not alone. In 1998, there were nearly 100 million offline debit cards with Visa or MasterCard logos in the wallets of U.S. consumers, according to ATM & Debit News. Today there are more than 100 million Visa Check Cards, alone, in consumers' wallets. On the other hand, fewer than 50 million Interlink online debit cards are in use in the U.S. today.

Transaction numbers portray an even more impressive scenario for check cards. Cardline, a sister publication to ATM & Debit News, figures Americans pulled these offline debit cards from their wallets 30.3 percent more often last year than they did in 1999; the average value of offline debit transactions grew in excess of 35 percent between 1999 and 2000.

All told, Americans used offline debit cards in nearly 5.3 billion transactions last year (up from a little more than 4 billion in 1999); average transactions were $39.70, according to Cardline.

Interlink averages about half as many transactions a year. The regional EFT networks don't break out POS from other types of transactions, like ATM withdrawals.

Until recently the only national online POS debit program, Interlink has been a tough sell, primarily because many of the banks that own Visa also had ownership interests in the regional EFT networks with competing online POS debit programs. Now, as many of those regional networks expand nationally and banks relinquish ownership interests in the networks, Interlink is looking like more of a competitor.

Star, which began as a West Coast debit network and now displays signage coast-to-coast, recently was purchased by Concord EFS, which also owns MAC and Cash Station, two other large regional EFT networks that previously had been owned by banks. Concord says it's planning to combine all of its debit products under the Star brand.

First Data Corp, the top credit card acquirer in the country, is buying a controlling interest in NYCE, a large regional network initially founded by a group of New York area banks. First Data has said it plans to use NYCE as the basis for a national POS debit program.

Network executives aren't saying for certain whether or when they'll up the ante for online debit merchants, but most experts agree it's just a matter of time before the fees inch up toward the planned new Interlink fees. Merchants aren't going to be happy.

Many merchants, including some of the largest chains, are steering check card customers toward PIN pads in an effort to reduce transaction fees. Nevertheless, check cards are forcing some shifts in preferences for payment types, according to data collected by The Takoma Group.

One supermarket chain, with 97 stores and $2 billion in annual sales, told us cash payments as a percentage of all transactions dropped by nearly 3 percent, combined, between 1999 and 2000 while credit card payments (including check cards) rose by more than 2.2 percent and online debit payments increased 1.5 percent during that same period.

A large home-store chain reported a nearly 3 percent drop in the share of POS transactions paid by check between 1999 and 2000 and a nearly identical increase in transactions initiated using credit cards (including check cards).

With so many cash and check payments moving to offline debit, one can't help but wonder why Visa wants to push up the cost of online debit card acceptance and risk further infuriating those merchants suing the bank card associations over offline debit pricing and acceptance policies. One answer seems obvious: because it can.

Patti Murphy is Contributing Editor of The Green Sheet and President of Takoma Group. She can be reached at pmurphy@takomagroup.com.