Debit cards: $50 spending limit coming?

♏*PHOENIX*♏ - posted on 03/10/2011 ( 15 moms have responded )

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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.

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I agree Heather. I use cash for everything except gas (and bills which are all drafted out). But this makes me angry nonetheless. It's like the entire financial system is rigged against those of us trying to do the right thing with our money. When we reserved a cabin for a mini-family vacation, we used our Visa debit over the phone. What then? That was beyond the $100 cap. We don't WANT a credit card, for many reasons.

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15 Comments

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Jodi - posted on 03/10/2011

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I use a debit card all the time.

But you know what, 44c isn't actually that much compared to what companies get charged for transactions here, especially for small businesses. I pay 61c on a $50 transaction.

Charlie - posted on 03/10/2011

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I don't have a credit card so no it wouldn't affect me , if I can't afford it now with hard cash then I can't afford it .

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The only time this would effect me is when I go to get gasoline. I don't buy anything over $50 otherwise so I wouldn't care.

Meghan - posted on 03/10/2011

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that would be awesome when a busy parent with multiple kids has to make 3 freakin trips to grocery store....*shakes head*

Bonnie - posted on 03/10/2011

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This is ridiculous! We always use our debit cards; well more so my husband then me, but he uses it whether the purchase is $5 or $500, etc.

Sharon - posted on 03/10/2011

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Hmmmm.... I'd be fucked. I use my debit card for everything. Refill my fake paper coffee cup 99cent SWIPE!

Lost my hair clip? $1.49 SWIPE!

I want a snack but can't leave the store property - "here take my debit card and please buy me some candy and get a snack for yourself too." $2 - $3 SWIPE!

And the cap doesn't make any sense. Saying that you may only use your card for purchases over a particular dollar amount makes more cents.

If I went to the quickie mart right now and they said that there is a 44cent charge to use my debit card for a cup of coffee, I'd walk out.

If I went to the grocery store and bought $300 in groceries and they said "theres' 44cent charge to use your debit card, I'd be fucking PISSED, but I'd get the groceries."

the companies are ridiculous. They won't be LOSING money once the 12 cent cap is in place, they just won't be making money hand over fist like they have been. assholes.

OH FYI - credit cards charge more per swipe, than debit cards. At least it does around here.

♏*PHOENIX*♏ - posted on 03/10/2011

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I agree Jessica, I would love to do that, and one day I hope I can, because this bank business if only going to get worse…im so sure

Jenny - posted on 03/10/2011

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That's what I'm working toward Jessica. I want no part of this broken system and am bringing my children up to self sufficient without it.

Jessica - posted on 03/10/2011

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Its this kind of shit that makes me want to go totally off the grid and not have to deal with stuff. Get some land, build a self sustaining farm, grow my own food, everything! But then I suppose I'd still need money to buy the land and supplies... ugh.

Jenny - posted on 03/10/2011

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It's retarded. I don't think anybody but ME should have any input into my money. I hate paying fees to use my money altogether and am moving towards cash exclusively.



$0.44 per transaction is a ripoff. Our Moneris provider charges $0.15 for a debit transaction to our company but we have much stricter banking rules here.



When is the Wikileak coming on that bank anyways? I can't wait to see a few of them get buried. Money is the root of all evil. Those banks have us by the short and curlies.

Jessica - posted on 03/10/2011

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That is absurd!! I use my debit card for everything, but if my bank started doing that I would switch banks, or start using cash for everything. I have a credit card but hate to use it, I try to only use it for emergencies. I just closed my savings account with my bank, that Ive had for years, because they decided to start charging fees for everything and requiring a minimum balance etc. Fucking ridiculous.

♏*PHOENIX*♏ - posted on 03/10/2011

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ts crazy!!

I was like ?WTF, and I don’t do debit cards anymore, but this still is upsetting…these banks get away with murder…

Lady Heather - posted on 03/10/2011

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Wtf? That's not even enough to buy the weekly groceries. Hahahaha. I try to carry cash and avoid cards altogether, but that's just nuts.

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