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$50 limit on debit? Seriously?

By Claes Bell, CFA · 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
Logic
March 11, 2011 at 10:51 am

You can't blame regulation on this, blame the banks. Think of it like this, if a parent gets on to a son for hitting the little brother, then the older brother hits him even harder because he doesn't want to be told how to treat his younger brother, now who is in the wrong? The parent for regulating how the brothers treat each other? or the older brother for abusing his position?

The banks have been walking all over us and now that the government is doing something about it they want to stomp on us to show us that walking all over us is the lesser of the two evils.

Claes Bell
March 11, 2011 at 10:47 am

Wow billbob ... I think that's just a tad bit extreme. Not all banks are JP Morgan Chase. A lot of them, especially on the regional and local level, were really prudent and ethical even during the worst years of excess. We need to take a deep breath and remember that banks provide a critical service to the American economy and that a lot of bankers are just regular folks doing their jobs as well and honestly as they can. We may not like what individual banks and bankers do -- I'm not crazy about ideas like debit card limits, for instance -- and if any broke the law during the years running up to the crisis, they need to be punished. But let's pause before we start advocating rounding people up and putting them in camps.

billbob
March 11, 2011 at 10:46 am

i think the solution is really easy, we just need to sentence the bankers who caused all of the problems in our economy to 50 years in prison, along with a confiscation of all of their assets (plus the assets of their families).

It's time to round them up and throw them into prison camps where they belong.

Matt
March 11, 2011 at 10:21 am

I use chase and if they do follow through with this and make my debit card virtually useless I will be switching banks as fast as I can.

Erica R.
March 11, 2011 at 7:25 am

Probably should have read the article, Debt and Debit aren't the same thing.

I bank with Chase, and so far have managed to avoid their monthly maintenance fees, since I have direct deposit. If they tried to set some insanely low cap just to throw a fit about the interchange fees, I would drop them immediately. If I go to dinner I don't want to have to worry about how much the meal is if I have a decent sum of money in my account. Chase likes to go crazy if you have two charges at the same location as well, even if it's just buying movie tickets, then snacks at the theatre.

buckstop
March 11, 2011 at 7:23 am

I had No Idea that the Banks were gouging 44 cents per transation.
To hell with them.....I will just get cash and they won't get any from me. I suggest everyone do the same. That will put them in their place.

Maybe just using a (credit card for everything and send one check that pays you cash back.

I hate the Banks and all their Whinning. They got Bailed out....when they should have been left to FAIL.
I received a $3.00 Check imaging fee last month from BOA....stop nickle and diming us.

Robert
March 11, 2011 at 6:20 am

Next time read the article. It's DEBIT not DEBT.

That being said: I've already decided to ditch JPM Chase because of their account fees. I don't bank with any of the major banks anymore. I maintain accounts with companies that don't charge a fee just to own an account or fees to use their cards. As a matter of fact, my bank REFUDNDS ATM fees that I have to pay for using another bank's ATM.

I think the government puts its hands into things in the name of helping but it always seems to lead to unintended consequences. Some regulation is a good thing. Over regulation leads to mess like this.

Ivy
March 11, 2011 at 1:36 am

You apparently didn't even read the whole title.

Ivy
March 11, 2011 at 1:36 am

You apparently didn't even read the title.

DE?
March 10, 2011 at 10:49 pm

I didn't read the article. I was just going to say that $50 in debt is too much.