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Chase to Limit Debit Card Transactions to $50?

This article was written by in Banking, Consumer. 39 comments.


CNN Money is breaking this story right now. According to a company insider, Chase Bank is considering limiting debit card transactions at either $50 or $100. Any purchase you plan to make with your debit card that exceeds the amount — for example, your weekly groceries at the super market — would be declined if this plan were to go into effect.

The bank claims the reason for this is the state of the industry after the regulations from the Credit CARD Act took effect, limiting the high cost of merchant transactions. Swipe fees or interchange fees, small but cumulative costs that retailers pay for every debit card transaction, have previously earned significant revenue for the banks. Chase claims it stands to “lose” $1 billion a year from these fees, which pay for the infrastructure that allows the transactions to be processed.

Of course, if this technique is implemented and successful, other large banks will follow suit.

This morning, I wrote an article about the benefits and drawbacks of credit unions, and as large national banks continue to develop policies and fees that are undesirable to customers and more desirable to shareholders whose only concern is the stock price, it makes more sense to switch.

I don’t use debit cards because I prefer the extra protection and rewards of using a credit card for my spending. Debit card is very popular, however, and a limit like this will only frustrate customers.

Is this a good decision for Chase Bank? Should debit card transactions be limited so a bank is less exposed to the chance to not earn an extra $1 billion in revenue?

CNN Money

Updated March 11, 2011 and originally published March 10, 2011. If you enjoyed this article, subscribe to the RSS feed or receive daily emails. Follow @ConsumerismComm on Twitter and visit our Facebook page for more updates.

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About the author

Luke Landes, also known as Flexo, is the founder of Consumerism Commentary. He has been blogging and writing for the internet since 1995 and has been building online communities since 1991. Find out more about him and follow Luke Landes on Twitter. View all articles by .

{ 39 comments… read them below or add one }

avatar Steve

They are “considering” it? They are just bluffing. They just want the regulations changed, back to their previously more favorable (for Chase) state. I would bet you $51 or $101, paid by debit card, that they will never implement this supposed proposal.

Interchange fees need to go down. There is nothing about processing an electronic transaction that makes it more costly for a larger transaction.

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avatar Luke Landes ♦127,475 (Platinum)

It crossed my mind that Chase wanted a story like this to get out to test the waters… but if that’s true, I can’t imagine they expected anything but disgust from customers. Other banks will be watching closely, though. As someone put it, “Welp. We lost that battle with the people’s government. S’pose we should punish the people.” I suppose they expect Congress to see this and to use it as fodder to repeal parts of the Credit CARD Act.

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avatar Hal (GT)

Haven’t the consumers turned more toward Debt cards and less to Credit Cards because being in debt is bad? Perhaps it’s just a sneaky attempt to get people to increase the CC use so that they increase their debt load. Just a stray thought.

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avatar Melissa

Hal, I had the same thought. I’ve paid my CC off and won’t touch it, as have many Americans. Now they’re trying to hit us somewhere else. They should realize we’ll just move to do something else-I used to just use cash and I’ll do it again if I have to.

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avatar TakeitEZ ♦549 (Dime)

I hope it is a bluff because I prefer to use my debit card over cash. If this goes into effect I would likely use cash more often, since I am still repairing my credit and don’t have the credit card option available to me at this time.

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avatar nimrodel ♦42 (Newbie)

I think this is ridiculous. While I don’t use debit cards myself, I do know a lot of people who only use debit cards because they don’t trust themselves with credit cards. Are they trying to force people to use credit cards? Only then they’ll start charging you a monthly fee just to have a credit card, but you won’t have a choice. Ugh. I’m getting sick of banks.

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avatar SteveDH

I too think they may be testing the waters so to speak. Regardless it would end the popularity of the debit card – at least in this household. They did note that it’s not just the transaction cost but the risk of losses they have experienced that are driving the limits. So there may well be a valid arguement from the “money making” side of the transaction fees. Bank of America, although silent about fees, is also looking for ways to limit losses and gain more profit – but that’s their job — right?

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avatar John

Debit cards SAVE banks money – fewer tellers, fewer checks and cash to handle PLUS they charge a merchant each time you swipe the card. It is just one big scam. If everyone would stop using debit and credit cards for 30 days and only use cash and especially the old-fashioned check, I think the banks would have second thoughts about another rip-off off the consumer.

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avatar Kasey

Interesting idea John – but I think that’s a lot like telling everyone not to go to the gas station for one day to teach big oil a lesson.

It just ain’t gonna happen. But – I do agree with people who think the banks are bluffing when they talk about this – it’s just a scare tactic. If there were spending limits on debit cards – consumers would use them less – that means EVEN LESS money from interchange fees.

But you can definitely expect to see fewer rewards debit cards, the disappearance of free checking, and lots and lots of new annoying bank fees.

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avatar Juice

Cash Is King!

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avatar rewards ♦31 (Newbie)

Reward credit cards are king!

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avatar William-Robert Kent Cousert

Do you want to carry cash with you whenever you want to make a major purchase? Most ATM machines limit you to $300 or $400 per day. What if you want to buy a new computer or a refrigerator? Do you think the stores will take your check for a big purchase like that?

What about airline reservations or online purchases?

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avatar Yana

Actually, I bought a new computer at Staples awhile back, and the (non-Chase) debit card did not work. I guess because of the amount of purchase. They let me write a check.

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avatar Juice

In those cases, I use a Credit Card. But, yes, stores would take my check for those big purchases.

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avatar John

Also stop direct deposits to your checking and savings account. Carry your checks to the bank for deposit. But pay for everything with hand written checks wherever they are still welcomed.

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avatar rewards ♦31 (Newbie)

Sounds like “cutting off the nose to spite the face”. If you don’t like it, take your business elsewhere. There will always be the opportunity for a different kind of bank/credit union/loan shark if people actually want it.

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avatar ChasedOut

Just another way Chase makes banking more “InCONvienent”…..They just recently changed the former WAMU free checking to $12-a-month fee checking (unless of course you meet certain criteria) and now they are considering limiting debit card transactions?? JPMorgan Chase gets away with what they want, when they want so this should come as no surprise (first they got Bear Stearns for $2/share and then went and acquired/stole WAMU for $1.9 billion when WAMU had approx $300 bil in assets just months before and in the process eliminated two big competitors in just over a six month period.) Sounds like a fair deal right?? I give you $1.9 bil and you give me something worth nearly $300 bil. Chase doesn’t play fair in any aspect so this should be no shocker….Also lets not forget about how they allegedly turned a blind eye to Mr. Madoff’s activities because that’s what benefited JPMorgan Chase the most…..My advice, drop the bank and head to your local credit union for way better rates, less fees, and a financial institution that has some real INTEGRITY..

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avatar Lloyd Lee
avatar Ceecee ♦53 (Newbie)

I also prefer a credit card for the theft protection and the rewards. You have to be disciplined to pay it off every month. Bank fees are out of control.

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avatar Mikey

Oh that’s enough! Let’s all go and withdraw ALL THE CASH we have deposited at Chase. They ask for it, they do not provide any of the services a bank should. Then we can have the US Treasury buy Chase back for pennies on the dollar after they go bankrupt (as you know, they do not have enough cash to cover all accounts). Hey, one can always dream that we would finally behave as Free Americans…

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avatar LaTisha @FSYAonline

I’m beginning to dislike Chase. I already have strong dislike for banks in general. (I don’t hate them, cause that would just require too much effort.) Yes I know they are out to make money but whatever happened to making lots of profit as opposed to gobs of profit. Greed caused the last recession and Chase will be leading the way into the next one.

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avatar PigPennies

This is getting beyond ridiculous. Why would I deposit money in a bank that then doesn’t allow me to spend my money? On top of that, if you don’t have direct deposit or a $1500 minimum balance, their “free” checking account now costs $10 a month. $120 a year! If you don’t have a $1500 balance, can you afford to waste $120 a year for the privilege of a bank account with Chase?! They are already on my bad list today after discovering a $20 service fee on my husband’s account for no reason that I can see in all of their new fine print. I’m leaning towards credit unions and small banks from now on, even though I’m sure this is a bluff. As pointed out above, it would cost the banks way more money to process all those extra checks.

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avatar PigPennies

Replying to add that I just got word they reversed the fee on hubby’s account because it shouldn’t have been there. A less picky person would have just lost $20!

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avatar Cejay ♦1,521 (Half-Dollar)

I really dislike Chase after all this. I , like so many others, think they are just testing the water. And like so many others I will just use Cash. My husband and I made a decision that when we paid off the credit cards we would not use them except where it made sense such as a vacation. We use cash as it is and I can just use more.

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avatar John Smith

Why do banks regard laws that put a stop to their thieving (e.g. contrived overdraft and credit card late fee charges) as “losing” money? You were stealing guys, hiding behind convoluted contractural booby-traps and buying Congress to keep the scam going. S-T-E-A-L-l-N-G: charging for not doing anything of value, not for taking a financial risk and not for being compensated for any real loss. You did it because you could get away with it. Go make an honest buck or go to Hell.
Chase is bluffing, their customers would leave en masse. Perhaps it is time that the US Treasury introduce digital currency, money in the form a debit card, get rid of cash and coin and parasite banking altogether.

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avatar brokeprofessionals

The scariest part of the post, in my opinion, was the idea that if Chase goes this route the other major banks will all certainly follow. It is so true that they all have this herd mentality. It really goes against the whole free market system too, because a lot of times they will ALL follow suit. You would think there would always be at least one major who did not follow suit and then made that part of their branding/advertising efforts, but that is not often the case with banks for some reason, from my experience.

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avatar Ryan@TheFinancialStudent

Chase’s explanation makes no logical sense. I would guess that fraud from debit cards is very low. The customers I deal with in retail typically use a PIN rather than just sign. Plus, assuming that the swipe fee is a percentage, you have a built-in scaling system. Larger, riskier transactions = you make more, part of which can help you fight fraud.

This is all even besides the point that whether a customer makes a $50 purchase or a $1,000 purchase, the processing costs are effectively the same. A few extra digits on a computer screen does not increase costs.

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avatar Debt Donkey

This idea would drive people away like cattle. Chase will surely come up with a more subtle way to make up for their losses…banks always do. This is way too “in your face” for an organization that has to think about public relations. I’ve had some rough dealings with Chase, and I personally think they are at the bottom of the barrel, but even this seems like too much for them.

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avatar skylog ♦368 (Nickel)

i just can not believe they will go through with this. they have to know that this will enrage customers. good luck counting that extra billion you saves when all of your customers are gone.

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avatar skylog ♦368 (Nickel)

*that should be “saved”

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avatar l avalos

Well that is pretty dumb idea. A limit of $50 what kinda crap is that. Basically at that point your debit is worthless. I use my debit so I don’t need to write a check. I guess they figure you would need to write a check then they can slap a nice fee on per check deal so their revenues go up wow that is smart. The consumer will never figure that one out. Credit unions hello I am with you all the way — see you later banks.
la

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avatar gotr31 ♦224 (Cent)

all the more reason to use cash these days.

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avatar tigernicole86 ♦55 (Newbie)

This is one of the reasons I left Chase. Having to jump through as many hoops as I did to keep my account, I left when they told me I would have to pay $12/month for an account that gave me almost nothing in return. I switched to US Bank and they were up front about fees and changes that were coming even with me being a new customer. Awesome service and I have so many locations near me now when Chase only had 1 location and it was 20 minutes away!

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avatar Rita

Chase isnt the only bank to rattt on. Most of the banks did not bluff when they began dropping “free” checking accounts, and imposing larger minimum balances or other nonsense to avoid monthly fees. Just look at Wachovia, Wells Fargo, TD Bank, Sovereign Bank, Chase, Citibank. Services that were once free are no longer; or offered to customers with over $15k or more daily balance at the bank. Chase was very good to warn their customers of their monthly fees and how to avoid them (which began February 2011) back in November 2010 for Chase Checking.
$50 limit for debit card is great; it will prevent me from overspending. A limit of $25 would be better. But, it could backfire: longer checkout lines; slower or nonexistent customer service. If you’re declined, then people will just split their purchase transactions to fall within limit, and create longer delays. It can create a big mess; some customers may just leave and go to another store. (or, everyone will just use their credit cards). IMHO, merchants aren’t gonna pass the savings to us. So who cares?

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avatar Mike

Banks make more money from merchants when consumers use credit cards. Banks make less money from merchants when consumers use debit cards. Its plain and simple why banks want to limit debit card use.

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avatar Yana ♦218 (Cent)

This is the first I’ve heard of this, and I don’t like it. I opened a Chase checking account because they gave me free money to do so. I regularly make debit card purchases, some over $100. If this change is made by Chase or any other bank that I use, I will take my money and flee that bank. If they all do it, I will move everything to the credit union. I will not have any bank dictating to me the terms of use of my own money. The way I look at it, they are not my boss – I am theirs. Better than that is to have a mutually respectful relationship, but when they pull this kind of crap on customers, my terms change.

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avatar DonnaFreedman ♦75 (Newbie)

I like to use my debit card at a store to get cash. (Standing at an ATM makes me feel vulnerable.) So I’ll buy the toothpaste I need at the drugstore or the carrots I want at the grocery store and get $40 or $60 back. Right before a recent trip, I bought a couple of apples and then got $100 in cash for walking-around money.
Would such transactions be barred? I suppose I could get around it by paying for each apple separately and getting $40 in cash each time.
Is Chase TRYING to make people switch banks?

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avatar Name

If this goes into effect I will defintely close my account.

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avatar Allan

If this goes into effect I will close all of my accounts with chase bank! They are using your money while it sits in a saving accout and have the audacity to pull this? All 5 of my accouts will defintely
disappear from CHASE!

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