Consumers expected to see new debit card costs
June 12, 2011
You've been hearing speculation about debit card "swipe fees" for months now and it's about to become reality: the Federal Reserve was expected to vote at the end of June on drastic new caps on the amount banks can charge retailers when you use your debit card at the store.
This is the second blow of a one-two punch banks have taken since the financial crisis prompted new restrictions on bank practices lawmakers consider deceptive. The first punch was a restriction on overdraft charges levied against your checking account, and now the Fed is poised to cut the debit card swipe fees 73 percent, from the 44 cents merchants typically pay per purchase now to 7 to 12 cents per swipe.
While it's fairly certain the Fed will move to drastically reduce the money flowing from merchants to banks, it's less certain how consumers will be affected. Retailers have promised to cut prices, but they are under no obligation to do so. Banks, meanwhile, are already taking steps to recover the $50 billion they are losing between lost overdraft charges and swipe fees.
Changes that could cost you more
According to the Los Angeles Times, JPMorgan chase & Co., Wells Fargo and other banks are cutting back rewards programs formerly linked to debit card purchases made against your checking account or savings accounts. Other possible changes:
- Monthly fees on debit cards tied to your checking account. Chase is testing one, and Bank of America and Citigroup already added fees to checking accounts.
- Caps on debit card purchases. According to the Times, most of the more than 7,500 banks and credit unions are already examining what limits or checking account fees will be acceptable.
How much are consumers will to tolerate? That remains to be seen, but it's clear that they have come to love using debit cards tied to a checking account, money market account or savings accounts. According to the Times, U.S. shoppers used their debit cards between 37 billion and 45 billion times last year--almost twice as often as they wrote checks or used credit cards.