Large banks could place limits on debit card use

Debit

The nation's largest banks may start limiting debit card usage, as legislators are targeting usurious bank fees. Image from Wikimedia Commons.

The largest banks in the nation may institute limits on how often debit cards can be used by account holders. Large banks are said to be hurting from laws which limit how much can be charged to retailers by banks when customers of those banks swipe their debit cards. Various acts of legislation have been aimed at curbing fees paid demanded by banks.

Cap on fees charged to retailers could prompt backlash

A law passed last year will cap the fees banks charge retailers when customers make purchases with debit cards. When a person pays for something with a debit card, the merchant is charged a fee by the bank that the customer belongs too, called an interchange fee. Last fall, the Durbin Amendment of the Dodd Frank Act gave the Federal Reserve powers to place limits on the fees that banks charge to retailers, according to ABC. The Fed proposed that fees be limited to 12 cents per transaction. The current rate is about 63 cents per transaction, though it isn’t likely that any of the largest banks in the nation will have to run for a cash advance to cover losses anytime soon.

Possible curb on debit purchases

It is rumored that the largest banks in the nation may begin imposing a limit on how many purchases people can make with their debit cards, or how large a purchase made with debit may be. The limit could be set as low as $50 to $100 in order to restrict customer use of debit cards, and thus not lose too much revenue. Interchange fees currently make up about $80 billion in revenue for the banking industry. Vikram Pandit, CEO of Citigroup, maintains that the fee caps will restrict available credit for banks and loan lenders, according to Bloomberg.

Trend of rising fees

The nation’s largest banks have been raising fees and cutting programs such as free checking for months, as an overall trend has been emerging of commercial banking trying to extract more revenue from customers. However, people can avoid dramatic fee increases by banking with community banks and credit unions. Just about every city in America, from Scottsdale to Birmingham, has a credit union or two open to just about anyone.

Sources

ABC

Bloomberg

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