Debit cards: $50 spending limit coming?

[MNeagle]

http://i2.cdn.turner.com/money/2011/03/10/pf/debit_cards_limit/chase_card.gi.top.jpg

NEW YORK (CNNMoney) -- Declined! Your debit card may soon be denied for purchases greater than $100 -- or even as little as $50.

JPMorgan Chase, one of the nation's largest banks, is considering capping debit card transactions at either $50 or $100, according to a source with knowledge of the proposal.

Why? Because of a tricky thing called interchange fees.

Right now, every time you swipe your debit card, your bank charges the retailer an average fee of 44 cents, which it shares with its partners. Those little fees, however, add up to about $16 billion per year, according to 2009 data from the Federal Reserve.

But as part of the Wall Street reform legislation that was passed last year, these fees are being slashed. The Fed is currently proposing rules that would go into effect in July and would cap interchange fees at 12 cents.

That's a big enough cut to cost Chase (JPM, Fortune 500) more than $1 billion a year. And Chase may not be alone. Other major issuers are also projecting huge losses from the interchange fee cap.

Joe Price, president of consumer banking for Bank of America (BAC, Fortune 500), said in an e-mailed statement that the lower fee wouldn't fairly compensate the bank for the infrastructure and services it provides to retailers.

And consumers would end up feeling the pain when Bank of America is forced to recoup costs "by increasing the cost of their everyday debit card transactions, limiting their payment choices, and impacting industry innovation," according to the email.

Credit cards from hell
Aside from mulling over a limit on transaction amounts, Chase is already testing $3 monthly fees on debit cards and $15 fees on checking accounts in certain states. Additionally, the bank announced in November that it has stopped issuing debit rewards cards.

A Chase spokesman declined comment on this story.

The revenue banks get from interchange fees helps to offset money lost from fraudulent transactions. So with the Fed's proposed cap in place, banks argue they won't have the money to protect themselves against fraud. And, of course, the bigger the purchase the bigger the risk, so banks are considering limiting consumers' ability to pay by debit card.

"If banks cannot recapture their fraud-prevention costs, it is likely that a lower percentage of transactions at the point of sale would be approved," Price said. "If the final rules that are issued in April look like the draft, there's no question that it will impact how we and other issuers price deposit and payment services and what features and benefits are included."

But a Bank of America spokesman declined to comment on whether the bank would cap debit card purchases at $50 or $100.

The 8 least evil banks
Representatives from Wells Fargo (WFC, Fortune 500) and HSBC (HBC) declined to comment on their plans, while a spokeswoman from Citi (C, Fortune 500) said the bank isn't making any changes at this time.

If a cap like this does make its way into accounts across the board, consumers would be forced to write checks, withdraw cash from ATMs, or put their spending on credit cards.

"The whole model on the debit card side is in flux because of Dodd-Frank," said Brian Riley, senior research director at financial services consulting firm TowerGroup. "The unfortunate thing is that the people who will really get hurt on this are the people who need the most help."

Many consumers with bad credit aren't able to qualify for credit cards -- and when they do, it's often with hefty rates and fees. Additionally, ATMs typically only dole out a limited amount of money at a time and checking accounts are being loaded with fees.

At the same time, even the customers who do qualify for credit cards are being punished for having tarnished credit. Bank of America, for example, announced a $59 annual fee last month for its riskiest customers -- making up about 5% of consumer credit card accounts.

http://money.cnn.com/2011/03/10/pf/debit_cards_limit/index.htm?hpt=T2

[Ash_Williams]

Govt price controls never work.

[Twisted Titan]

"If banks cannot recapture their fraud-prevention costs.............


Sure they can. JUST SHUT DOWN THE BANKS CAUSE THEIR WHOLE BUSINESS IS FRAUD

[Cobalt]

I haven't used my debit card in years other then for a bank ATM withdrawal.

I think it is stupid when I see people use them for those low purchases all day long.

I was in the gas station the other day paying cash like I always do and a girl about 20 came in and ran her card for a chapstick for $.79 and the guy right behind her used a card for a $.75 coffee refill, the station charges $.45 for debit card use

[willie pete]

when chase started charging a fee last month for checking, that was the last straw for me, I bailed, and when I was closing the account, the rep I was talking too, said a lot of people were...doesn't matter though

""If banks cannot recapture their fraud-prevention costs, it is likely that a lower percentage of transactions at the point of sale would be approved," Price said.....

^^^that's code for: we're paying a team of schmucks $175k a year each, plus holiday bonuses...so we have to re-coup that :D

[Uncle Salty]

Govt price controls never work.


Exactly. And that is what our banking system is.

The Fed has a monopoly on our money. The banks set prices in collusion with each other. You must be in the system to function reasonable well.

[Libertytree]

I haven't used my debit card in years other then for a bank ATM withdrawal.

I think it is stupid when I see people use them for those low purchases all day long.

I was in the gas station the other day paying cash like I always do and a girl about 20 came in and ran her card for a chapstick for $.79 and the guy right behind her used a card for a $.75 coffee refill, the station charges $.45 for debit card use


It happens everyday at my store, people wanting to use a debit card for a $1.05 purchase. I've even seen them wanting to do a split tender and pay .75 in change and put the rest on the debit card. In many states it's illegal to require a minimum purchase and can result in a hefty fine and revocation of your CC/debit abilities.

A couple weeks ago my boss faxed all the stores a sheet to post for the customers asking them to pay in cash instead of using CC/debit. While I agree with the premise, it's a joke to think people will do this just because you asked them to, as there is no incentive for them to use cash over CC/debit. The people who use their CC's are constantly going on and on about all the points they're acquiring...for free.

[Ponce]

I have only two credit cards, the one that I use on line (only) all the time and the one in reserve that I never use.........well, the one in reserve sent me letter saying that I had the "OPTION" of either paying $29.00 a year to have it.........or......and here is the good part, or "NOTHING".........made no sense to me so that I called them and cancelled it right away, they asked me how come I didn't choose "nothing" and I told them that nothing is no longer for free in this world and that I smelled a rat.

First post of the day............good morning to one and all.

[Sparky]

...
I was in the gas station the other day paying cash like I always do and a girl about 20 came in and ran her card for a chapstick for $.79 and the guy right behind her used a card for a $.75 coffee refill, the station charges $.45 for debit card use


Need to point out a correction here. The station isn't charging a fee, they are paying a fee to the banks. The customer doesn't (directly) pay the fee, so that's why they are willing to swipe for 79 cents. Of course, the fee is ultimately built into the price of the product.

Another thing... The fee is typically 2% of the transaction, plus an additional flat fee (a few cents?). So the 79-cent swipe costs the gas station about 4 cents.

[madfranks]

there is no incentive for them to use cash over CC/debit.


My favorite liquor store posts two prices for every item, the "regular" price and the "cash discount" price. Rather than saying they'll charge you more for using your debit/credit card, they offer a discount for cash.

[Libertytree]

...
I was in the gas station the other day paying cash like I always do and a girl about 20 came in and ran her card for a chapstick for $.79 and the guy right behind her used a card for a $.75 coffee refill, the station charges $.45 for debit card use


Need to point out a correction here. The station isn't charging a fee, they are paying a fee to the banks. The customer doesn't (directly) pay the fee, so that's why they are willing to swipe for 79 cents. Of course, the fee is ultimately built into the price of the product.

Another thing... The fee is typically 2% of the transaction, plus an additional flat fee (a few cents?). So the 79-cent swipe costs the gas station about 4 cents.


That's correct Sparky. CC's charge a higher % than debits do, with Amex being the highest of all the card companies. These rates are negotiable to a point as well depending on which merchant services provider you're working through.

[solid]

I never would have expected the banks to even consider something like this. This would force folks to use FRN's, wouldn't it? Paper that the banks don't physically have in the banks. I thought the trend was away from cash, towards a digital currency.

We are a consumer based society, get in the way of folks spending their way to success..this could lead to a run on the banks actually. Enough addicts get denied digital transactions and the masses could stampede.

[lapis]

The 8 least evil banks (hot link from article that takes you to 9 so-so banks)

"Least evil" isn't good enough. Starve the beast, bank with small banks or local credit unions.

Bank Locally (http://solari.com/articles/banks/)

"The fastest way to kick-start the shift away from a centralized economy is to stop financing the big banks—and through them, the activities they are financing—and to switch your bank deposits to a well-managed, community bank or credit union. In fact, it's the single greatest point of leverage you have as a consumer."

[Sparky]

I never would have expected the banks to even consider something like this. This would force folks to use FRN's, wouldn't it? Paper that the banks don't physically have in the banks. I thought the trend was away from cash, towards a digital currency.

We are a consumer based society, get in the way of folks spending their way to success..this could lead to a run on the banks actually. Enough addicts get denied digital transactions and the masses could stampede.


It's so hard to get at the truth from most journalism.

Here's an expert from this piece:

"Right now, every time you swipe your debit card, your bank charges the retailer an average fee of 44 cents,..."

Within the same article, they reference another article that makes this statement:

"With average interchange fees currently running from $1 to $1.30,..."

These articles don't explain the details very well. Every time you swipe, the retailer is charged a flat fee (a few cents?), plus a fraction of the transaction amount (~2%). I think these to excerpts are referring to the total fee. So right now, the banks receive a little more than 2% per transaction. If the fee is capped at 12 cents, their fee on a $100 swipe would be 0.1%. This is such a dramatic drop that I'm starting to think that the flat fee is more than a few cents, and they are only talking about the flat fee. That might explain why the two different articles quote an "average" fee that differs by a factor of 2.

More shoddy journalism.

[ximmy]

I have little regard for sheeple who stick with mega-banks

[Libertytree]

there is no incentive for them to use cash over CC/debit.


My favorite liquor store posts two prices for every item, the "regular" price and the "cash discount" price. Rather than saying they'll charge you more for using your debit/credit card, they offer a discount for cash.


My boss just doesn't get this line of thought, somehow he thinks a request will suffice, while I think his notion is pure folly. He could really use this to our advantage but his short sightedness and edjumakation keep getting in the way.

You'd have to pry the plastic out of the peoples hands, when that option is taken away they freak out. Their thought process is F'd up too because they will go along with anything that lets them continue using plastic and I have to say that they have been well conditioned in this regard. Baaaa Baaaa........

[Cobalt]

...
I was in the gas station the other day paying cash like I always do and a girl about 20 came in and ran her card for a chapstick for $.79 and the guy right behind her used a card for a $.75 coffee refill, the station charges $.45 for debit card use


Need to point out a correction here. The station isn't charging a fee, they are paying a fee to the banks. The customer doesn't (directly) pay the fee, so that's why they are willing to swipe for 79 cents. Of course, the fee is ultimately built into the price of the product.

Another thing... The fee is typically 2% of the transaction, plus an additional flat fee (a few cents?). So the 79-cent swipe costs the gas station about 4 cents.


The station here charges a $.45 fee directly to the customer and it is added to the subtotal, they have signs on all the pump pay stations as well as the cash register if you pay inside that you will pay $.45 for every debit card transaction

[sirgonzo420]

I have little regard for sheeple who stick with mega-banks


Banking is banking.

A small bank is really just a big bank with a nicer face.

They all deal in usury and debt.

[ximmy]

I have little regard for sheeple who stick with mega-banks


Banking is banking.

A small bank is really just a big bank with a nicer face.

They all deal in usury and debt.


stick with chase then... I'll stay with my local credit union.

[Ash_Williams]

These articles don't explain the details very well. Every time you swipe, the retailer is charged a flat fee (a few cents?), plus a fraction of the transaction amount (~2%). I think these to excerpts are referring to the total fee. So right now, the banks receive a little more than 2% per transaction. If the fee is capped at 12 cents, their fee on a $100 swipe would be 0.1%. This is such a dramatic drop that I'm starting to think that the flat fee is more than a few cents, and they are only talking about the flat fee. That might explain why the two different articles quote an "average" fee that differs by a factor of 2.

The people I know in business who have spoken to me about this pay 80 cents per debit transaction and no percentage on top. This is small time shops though, a dozen transactions per day maybe. Credit comes in around 3% with no flat fee.

The one shop does offer a 3% discount for not using a credit card. His customers are 95% nonwhite, however, so he doesn't get tattle-talers phoning up Visa and complaining about how he broke the rules.

What I'd like to see at every store, is one checkout for cash and another for plastic. For get the extra fee or discount or whatever, just let people save themselves a couple minutes by paying cash.

[Libertytree]

These articles don't explain the details very well. Every time you swipe, the retailer is charged a flat fee (a few cents?), plus a fraction of the transaction amount (~2%). I think these to excerpts are referring to the total fee. So right now, the banks receive a little more than 2% per transaction. If the fee is capped at 12 cents, their fee on a $100 swipe would be 0.1%. This is such a dramatic drop that I'm starting to think that the flat fee is more than a few cents, and they are only talking about the flat fee. That might explain why the two different articles quote an "average" fee that differs by a factor of 2.

The people I know in business who have spoken to me about this pay 80 cents per debit transaction and no percentage on top. This is small time shops though, a dozen transactions per day maybe. Credit comes in around 3% with no flat fee.

The one shop does offer a 3% discount for not using a credit card. His customers are 95% nonwhite, however, so he doesn't get tattle-talers phoning up Visa and complaining about how he broke the rules.

What I'd like to see at every store, is one checkout for cash and another for plastic. For get the extra fee or discount or whatever, just let people save themselves a couple minutes by paying cash.


A dozen transactions a day really ain't worth worrying about, though I probably would anyway just out of spite for the banks, but that's chump change to me. On the weekends we probably run anywhere from 300 to 600 tansactions per day per store, depending on the store (5 stores), with approx 75%+ of those being "plastic" sales. Run that over the course of the month and we're talking serious numbers! So why my boss/owner can't grasp the idea of a cash discount boggles my mind!!

[Sparky]

...
I was in the gas station the other day paying cash like I always do and a girl about 20 came in and ran her card for a chapstick for $.79 and the guy right behind her used a card for a $.75 coffee refill, the station charges $.45 for debit card use


Need to point out a correction here. The station isn't charging a fee, they are paying a fee to the banks. The customer doesn't (directly) pay the fee, so that's why they are willing to swipe for 79 cents. Of course, the fee is ultimately built into the price of the product.

Another thing... The fee is typically 2% of the transaction, plus an additional flat fee (a few cents?). So the 79-cent swipe costs the gas station about 4 cents.


The station here charges a $.45 fee directly to the customer and it is added to the subtotal, they have signs on all the pump pay stations as well as the cash register if you pay inside that you will pay $.45 for every debit card transaction


Oh. That's insane.

[mick silver]

when my bank tell me this i will move every f penny i have into cash .