New Federal Reserve rules will heavily impact the debit card business on Oct 1, when banks can no longer charge more than 21cents in basic fees, resulting in new bank rules that will take effect. Previously some merchants were paying up to 44cents in basic bank fees for a card swipe in addition to a percentage of the sale, taking a huge chunk out of small transactions for many merchants. The banking industry stands to lose billions a year with the tighter rules, and was successful getting to lower fee raised from a proposed 12cents to the higher approved 21cents. Some banks such as Wells Fargo will charge a new $3.00 a month fee to debit card users, however such fees could certainly increase or spread to other banks. Chase bank is also considering limiting debit card purchases to as little as just $50 a month per customer to cut their losses from the new rules.
Users can also expect all sort of rewards programs to end. Previously, banks would give debit card holders some cheap prizes they could qualify for, paid for by the huge fees they charge merchants for card swipes.
Debit cards have gotten out of control, becoming a major bank ripoff to many merchants paying huge fees for tiny purchases from consumers who really should use cash for such small purchases. Many merchants tired of the huge fees began to lobby for reforms. The Federal Reserve Board agreed that the debit card problem is well out of control,l and after much study and debate, opted for the new rules by a 4-1 vote in late June.
If some debit cards are only limited to $50-100 a month for purchases, and new fees are charged consumers to use debit cards, then users are going to have to decide if using cash or even credit cards isn’t a better option for many purchases.