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Hammer Could Fall On Debit Cards

New iPad 2: $499. Smart Cover for your iPad: $39. Debit card purchase: Next to impossible.

Chase Bank is considering a plan to restrict debit card use to less than $50.That might be the scenario facing consumers this summer, as banks — incensed over transaction fee restrictions about to be imposed by the government — threaten to wallop consumers with new ATM fees, reduce program benefits and limit debit card use.

First out of the gate is JPMorgan Chase, which is considering a plan to deny debit card use on purchases greater than $50 or $100, a draconian measure that is supposedly designed to help fight the new government rules, which are scheduled to take effect in July.

That’s when the Durbin Amendment will cap how much banks can charge merchants for debit card transactions. While they now charge retailers an average of 44 cents in transaction fees, those fees will soon be capped at 12 cents. (A bi-partisan group of lawmakers is trying to delay action on the fee changes to better study their impact.)

Banks say they’ll lose out on $15.2 billion per year in revenue. So by capping how much you can put on your debit card, banks like Chase will essentially force you to use credit cards where they can earn higher fees.

And if Chase puts this cap in place, you can bet other banks will follow.

Lawmakers last year introduced the legislation, which calls for the cap on so-called swipe fees, to help small businesses, which must eat the cost of offering convenience to their customers or pass it along in the price of their products and services.

Now that move may backfire as the banks move forward with their plan to limit debit card purchases. The burden will be placed on you, the consumer.

If you like using your debit card to pay bigger bills, booking hotels or paying for airfare, car repair, home improvements or a new television, you’ll now have to put it all on a credit card.

If you pay off your balance in full every month, you won’t incur interest charges on your credit card. But what if you accidentally miss a payment?

Government officials are taking note, and this week a bipartisan group of nine senators introduced a bill that would delay the fee cap. The bill would postpone the swipe fee changes for two years to allow further study.

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Comments (3)
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  1. NIkki said:
    on March 17th at 10:08 am

    WTF? These banks are crooks. Americans comsumers are paying these banks to rob them. My advice go to consumers, use a credit union and not a bank. Move your national credit cards to credit union credit cards programs (lower interest). If you need cash, write a check to yourself and cash inside the credit union. Keep extra cash in your house for an emergency and learn to save3.

  2. JWen said:
    on March 19th at 02:13 pm

    This is just ridiculous. If banks are losing that much in revenue, who do you think they will use to make up the money from? THE CONSUMERS! This will backfire in every way. The small businesses will not give the discounts to the consumers. They will more than likely keep the extra savings for themselves. What about the people with no credit cards? They will be forced to keep more money in cash since they can’t use their debit cards. How will that affect the younger population? Again, RIDICULOUS!

  3. Tamey said:
    on June 13th at 10:20 am

    They can always recoup the money from Canadian merchants who currently pay a 0 cents on transaction fees versus the 44 cents we small biz folks have to pay.