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$50 limit on debit? Seriously?

By Claes Bell · Bankrate.com
Thursday, March 10, 2011
Posted: 3 pm ET

Just in case you were wondering if banks are still upset about upcoming limits on the debit interchange fees they can charge merchants, rest assured they are. The latest scheme to replace interchange fee income/punish America for its insolence comes via JP Morgan Chase, which is floating the idea of placing limits on the size of purchases checking account customers can make using their Chase debit cards.

Chase is mad about interchange limits, and they don't care who knows it. (photo by Ed!)

Chase is mad, and they don't care who knows it. (photo by Ed!)

From American Banker:

JPMorgan Chase is considering limiting the size of purchases allowed on its debit cards in response to the Federal Reserve Board's proposed cap on interchange fees.

Banks already have added checking account fees, and many analysts expect them to go further to recoup revenue lost to regulation by charging customers for using their debit cards and limiting the number of purchases they can make in a month.

"All institutions are forced to consider how to find revenue to make up for losses here because they still have to maintain really strong fraud prevention programs, they have to maintain really strong ...  internal operations (and) they need to maintain enough revenue to support services they provide consumers every day," said Ken Clayton, senior vice president and general counsel for card policy at the American Bankers Association.

The theoretical limits would bar purchases over an arbitrary limit of $50 or $100. To understand how that would impact a typical consumer, imagine you're finally get into the front of the checkout line at the grocery store. Maybe you're buying a little more than usual, so your bill comes to $105, rather than the usual $85, but you're sure you have the money in your checking account because you just got paid. You swipe your debit card and enter your PIN, only to see the screen come up "declined." At that point you have two options: have the cashier split your purchase and re-ring some items to avoid the $100 limit, or find another way to pay. Meanwhile, your fellow shoppers are grumbling and looking at their watches, and the line's getting bigger behind you. Not much fun, right?

Chase's reasoning for the move is that, because Fed rules authorized by the Dodd-Frank Act mandate banks charge merchants a relatively small flat fee instead of the hefty percentage they're used to, they'll just have to force people to make more numerous, smaller purchases to make up the difference.

I have to think policies like this would be pretty disastrous for any banks that tried to implement it. There's a lot of customer inertia in the banking industry, but I'm pretty sure getting held up in the checkout line a couple of times for exceeding some arbitrary purchase limit would do a pretty good job overcoming it.

My instinct is that this is just a ploy to put further pressure on Fed to delay or raise the fee limits they're considering, because it's hard to imagine any bank voluntarily making their debit cards essentially useless.

What do you think? Would you switch banks if your bank tried to implement a debit card purchase limit?

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27 Comments
Dan
March 17, 2011 at 8:34 pm

The fees are being raised by the banks because the overdraft fees have been significantly reduced and now the banks are going to be losing up to $0.32 per transaction from the debit card transactions. Why? Because the few irresponsible American's that did pay overdraft fees complained and then the Feds got even more involved into our daily lives by slapping the banks on the wrist. I have a feeling Chase is just trying to get enough people angry enough that they will complain to lawmakers to prevent the new interchange rules from going into effect. My checking account and my credit cards were perfect before the government stuck their noses into everything (CARD Act,DODD-FRANK etc). Now the banks are reacting by raising fees. What did you expect America? That they would take it lying down? Maybe American's should be more responsible with their banking products and those that do pay the fees can either continue paying or get their acts together. Also, the government should remember that we are capitalists and that they should let the markets take care of themselves ie if banks charge too many fees, customers walk away. If customers continue to write NSF checks, then they pay the fees. Frankly, I think that the banks and credit unions need protection from idiot American consumers not the other way around.

rollerdoll
March 17, 2011 at 12:01 pm

Credit unions all the way, baby.

alan
March 15, 2011 at 5:37 pm

CAN YOU SAY BEFORE THE PHONE HIT THE FLOOR

Opus
March 14, 2011 at 10:11 pm

We the people, when we feel are getting the shaft from whatever private industry or bank, go to the government and decry that they must save us from this atrocity. Uncle Sam passes rules or regs that spanks the institution for it's "shafticity" we are suffering and, of course, that institution finds a way to get around it or to re-shaft us in a different way. (Been like this regardless of who's in office.) But now, we have the overly brainwashed right that now turns around and gripes because the government dared to spank private industry like that and make such a mess. Tsk Tsk

JD
March 14, 2011 at 8:38 pm

I agree a hundred percent with Agent Zed.

We could and WOULD shut that bank down as consumers, SO fast their fat balding board of directors wouldn't know what happened.

Let them try this stunt and see if they get away with it.

Can you say JP Morgan Chase GONE?

Agent Zed
March 14, 2011 at 7:40 am

I was a Washington Mutual customer, now am a part of Chase due to the buy-out of WM by Chase. So far, nothing they've done has made me decide to switch, although I know other people that did switch out. I can see an idea like this popping up for discussion within their boardrooms. However, I can't see them really implementing this without understanding just how large a percentage of its customers would switch out. This would supply the perfect TV commercial fodder for other banks. Debit card purchases are me spending MY money; checking account charges are bad enough, any bank making me process 2 transactions just to get groceries would become my ex-bank in a heart-beat.