Chase phases out debit card rewards ahead of proposed fee cap
Written by Michele Lerner
Posted On: March 25, 2011
The Washington Post recently reported that Chase debit card customers who are earning debit rewards will stop accruing those rewards as of July 19, 2011. New Chase customers have been barred from enrolling in the debit rewards program as of Feb. 8, 2011.
The Federal Reserve proposes a cap of 12 cents per transaction on the fees that financial institutions can collect from merchants when customers use debit cards. Currently, merchants pay one to two percent of the transaction in fees, or $1 to $2 for a $100 purchase.
The change could reduce bank revenue from swipe fees by anywhere from 70 to 90 percent. Credit card companies were successful in lobbying to prevent a similar cap on credit card swipe fees, according to the Washington Post. The Fed is expected to rule on the cap April 21, 2011 and the law would take effect in July.
Banks may cut back on perks
On the surface, the proposed cap on debit card swipe fees seems as if it should impact only merchants and financial institutions, but many critics of the cap anticipate that banks, in order to recoup lost revenue, will end free checking accounts and other rewards programs. Michelle Singletary, a syndicated columnist in The Washington Post, says some banks may start charging convenience fees for debit cards or stop offering them altogether.
Some proponents of the cap on debit card swipe fees say that merchants may lower prices to reflect their reduced costs if the law goes into effect, but not everyone expects merchants to decrease prices.
If you are currently maximizing your rewards points on your debit cards or rewards credit cards, pay careful attention to notices from your bank and credit card company in the coming months. Financial institutions are scrambling to figure out how to continue to earn their own rewards for providing debit and credit cards while not losing customers. The result is likely to be changes to your rewards program as well as to your bank account fees and services.