JP Morgan Chase may cap debit transactions at $50 or $100

Close-up of the VISA logo on a debit card. The Chase bank logo can be seen in the bottom right-hand corner of the photo.

JP Morgan Chase could see a mass customer exodus if a debit card transaction cap is instituted. (Photo Credit: CC BY/MoneyBlogNewz/Flickr)

Customers of JP Morgan Chase may have additional restrictions placed upon their debit card usage soon. The third-largest bank in the U.S. may cap debit card transactions to $50 or $100 at a time, even if the card is run as credit, says an anonymous insider. Blame it on the rising interchange fees banks charge retailers per transaction, reports Chicago Breaking Business.

Interchange fees: Why retailers demand minimum debit transactions

On average, banks charge retailers 44 cents for every debit card transaction, as an interchange fee that the bank shares with its financial partners. Federal Reserve data indicates that interchange fees from retail debit card transactions amounted to $16 billion in 2009. Wall Street reforms introduced by the Obama administration will curb the amount of such fees. Interchange fees may be capped at only 12 cents per debit card transaction, beginning July 2011.

Passing the expense on to customers

JP Morgan Chase and other banks aren’t enamored with this. Chase estimates it would cost over $1 billion per year. Joe Price, president of consumer banking at Bank of America, said that a 12-cent cap would not fairly compensate the bank for infrastructure costs. Banks would increase consumer costs for debit cards and other services to compensate.

One innovative way Chase would recoup costs is to charge customers $3 monthly for having a debit card, and $15 more each month to maintain checking accounts. Match this with Chase’s defunct debt card rewards program and customers are left out in the cold.

Hate ATM fees? Avoid them!

There are a number of ways that banking customers can avoid excessive debit card/ATM fees. CBS Moneywatch and Personal Money Store have some ideas that consumers try as many of the following as possible to beat the bank.

Open a brokerage checking account

Brokerage checking accounts are generally high-yield. Not only that, but accounts at some brokerage houses rebate customer debit card transaction fees at the end of the month if a separate brokerage account is maintained.

Try online banking and apps

Consider online banking. Some charge no ATM fees at all, while others will completely reimburse customers for a limited number of out-of-network ATM fees each month. Keep in mind that maintaining a minimum balance in the account is often required at online banks.

Remember that there are also numerous free iPhone and Android applications that make finding an in-network ATM a snap. Who wants to pay $3 every time cash is needed?

Get cash back at the store

When the option is available, try to use your debit card for cash back when you make purchases. There is typically no transaction fee involved, although the amount of cash you can withdraw may top out at around $60.

Need same day loans?

Sometimes, what a consumer has in the bank isn’t enough, particularly during an emergency. Same day loans and installment loans can be had for a relatively modest fee, and they won’t drag a checking account into overdraft.

Sources:

CBS Moneywatch

Chicago Breaking Business

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