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.
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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?
Updated October 9, 2016 and originally published March 10, 2011.