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$50 limit on debit? Seriously?

By Claes Bell ·
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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March 13, 2011 at 7:02 pm

In all honesty, I could get used to life without a bank. It is just another way that The Federal Government can get into your private information; power given through The Patriot Act.

Sara: I don't think that "Worried for US" quite understood the issue; doesn't seem to understand that The Federal Reserve is not part of the federal government. You are so quick to put down the Tea Party, like you know all about them. I bet you have no idea what the Tea Party believes in nor who the people are that support it. If I was to guess I would say you probably voted for Obama and never even researched who he was (completely inexperienced and the most left voting record of the Senate)
. ...And THAT is why we are in the mess we are in.

March 13, 2011 at 2:51 pm

It is like every other industry and taxes in general. The fees and taxes are added at a time when they can be rationalized. Later, the rationalization may no longer carry any weight but the company or government is unwilling to re-examine the need or justification behind the increase because they love the money. Last fall I bought an airline ticket with a major portion of it being a fuel surcharge. Last fall there wa no oil price spike.
We should not be afraid to challenge arbitrary corporate charges any more than we would protest a local tax increase. In this case vote with your business. But, to be effective with that you need to call the contact line and tell them why you're dropping them.

March 13, 2011 at 2:39 pm

Worried: Am I mistaken or is the government not actually LOWERING fees and the banks pushing that off on the consumer because they are used to the high fees they imposed without government intervention (ie: they have been ripping businesses off with their high transaction fees and now can't live without them)?

Why do you blame the government here? Must be a member of the tea party.

March 13, 2011 at 12:35 pm

That's laughable. People are not going to use debit cards if they have those kinds of limits. There are too many alternatives, like using a credit card, using a check or cash.

Claes Bell
March 11, 2011 at 7:29 pm

Hi Worried, sorry for the delay. All our comments have to be individually approved. I'll make an effort to monitor them a little more closely in the future.

Worried for US
March 11, 2011 at 5:56 pm

Just a quick question regarding getting a comment posted. Can anyone tell me how long it takes to have one show? I wrote my original comment a couple of hours ago. Now, maybe I am mistaken, but I was sure five to ten minutes was much sooner than two to three hours -- or am I in the wrong universe? :)

Meagan M Bell
March 11, 2011 at 5:22 pm

I think its hard to keep in mind that MOST of the people who are affiliated with banks are just regular people working their jobs to take care of their families. The decision makers are a handful of people at the top. I agree that we need to have tough laws to regulate bankers and actually enforce the punishments but most banking professionals are honest and hardworking.

Worried for US
March 11, 2011 at 3:06 pm

First, I said from the beginning that the banks were going to get everyone used to using the debit cards for 'free' and then they were going to start charging high fees. When we got our first card, we had a $300 daily limit per purchase which made buying furniture a pain. The only good thing is that I never stopped carrying my checkbook! Now... this business with the government trying to get more and more money is something I didn't count on. I would have thought they'd want to keep the 'little guy' happy, but I didn't take into consideration just WHO is running things... Anything Dodd and Frank have their hands on is a sure mess for the people. We need to write to all our people in office and demand a stop to this nonsense! I am far from well to do and need to count my pennies, so this new threat from our supposed leaders is really a sore point! I signed up for my bank because there are no charges for writing checks, monthly fees, using my debit, etc... but I can see this coming to an end no thanks to our 'friends' in office. I remember at one point we paid up to fifty cents for every check we wrote from one bank. That adds up fast when you cannot pay many of your bills in person. Another point -- Uncle Sam wants everyone to have a checking account today -- that is how they prefer to send monthly Social Security payments. There is talk about being charged a fee for every deposit, withdrawal, transfer, check, etc so the governmnet can raise more money to lower the deficit (sp)! So.... what's a person to do? You need the bank account, but will be charged out the 'ying-yang' from Uncle Sam and then some more by the banks! Who's looking out for you now? The country's going to the dogs and unless we do something quick, it's going to be deep in the mess before most people know they've stepped in it!

March 11, 2011 at 12:44 pm

I would switch in a heart beat. It's like paying for luggage when traveling, when one airline does it, the rest will follow. And one day you wake up and it's the norm. Who needs luggage anyway. Just pay cash!!!

Claes Bell
March 11, 2011 at 10:51 am

Also, it's worth remembering that although this individual idea is annoying, it hasn't even come close to going into effect yet, and JP Morgan Chase actually was relatively responsible during the crisis, especially compared to the other Too Big To Fail banks. I'm no Chase cheerleader, but let's take a deep breath.