JPMorgan mulls $50 cap on debit card purchases

Posted March 10 at 10:49 a.m.

Your debit card may soon be denied for purchases greater than $100 — or even as little as $50.

JPMorgan Chase, one of the nation’s largest banks, is considering capping debit card transactions at $50 or $100, according to a source with knowledge of the proposal.

Why? Because of interchange fees.

Right now, every time you swipe your debit card, your bank charges the retailer an average of 44 cents, which it shares with its partners. Those fees, however, add up to about $16 billion per year, according to 2009 data from the Federal Reserve.

But as part of the Wall Street reform passed last year, these fees are being slashed. The Fed is proposing rules that would  cap interchange fees at 12 cents, starting in July.

That could cost Chase more than $1 billion a year. And Chase may not be alone. Other major issuers are also projecting huge losses from the interchange fee cap.

Joe Price, president of consumer banking for Bank of America, said in an e-mailed statement that the lower fee wouldn’t fairly compensate the bank for the infrastructure and services it provides to retailers.

And consumers would feel the pain when Bank of America is forced to recoup the difference by “increasing the cost of their everyday debit card transactions, limiting their payment choices and impacting industry innovation,” according to the e-mail.

Aside from considering a limit on transaction amounts, Chase is  testing $3 monthly fees on debit cards and $15 fees on checking accounts in certain states. Additionally, the bank announced in November that it has stopped issuing debit rewards cards.

A Chase spokesman declined comment on this story.

The revenue banks get from interchange fees helps offset money lost from fraudulent transactions. So banks argue they won’t have the money to protect themselves against fraud with the Fed’s proposed cap in place.

“If banks cannot recapture their fraud-prevention costs, it is likely that a lower percentage of transactions at the point of sale would be approved,” Price said. “If the final rules that are issued in April look like the draft, there’s no question that it will impact how we and other issuers price deposit and payment services and what features and benefits are included.”

But a Bank of America spokesman declined to comment on whether the bank would cap debit card purchases at $50 or $100.

Representatives from Wells Fargo and HSBC declined to comment on their plans, while a spokeswoman from Citi said the bank isn’t making any changes at this time.

If a cap does make its way into accounts, consumers would be forced to write checks, withdraw cash from ATMs or put their spending on credit cards.

“The whole model on the debit card side is in flux because of Dodd-Frank,” said Brian Riley, senior research director at financial services consulting firm TowerGroup. “The unfortunate thing is that the people who will really get hurt on this are the people who need the most help.”

Many consumers with bad credit can’t qualify for credit cards — and when they do, it’s often with hefty rates and fees. Additionally, ATMs typically dole out only a limited amount of money at a time and checking accounts are being loaded with fees.

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  1. Cheryl March 10 at 2:12 pm

    This is bullQ#$(*&#(*! I will fight this all the way. So first you only get so many checks per month. Then they charge you a yearly fee to earn miles – enticing the use of the card. Now you cannot access your money? How are businesses who would prefer not to use a credit card going to entertain clients, travel, etc.? I will pull all of my accounts if they do this. I have to pay fees for when MY clients use credit cards, and Chase / Paymentech has no problem charging me for that! In other words, they cannot take their own medicine.

  2. Joe Hrncirik March 10 at 2:54 pm

    Perhaps it it time to go back to cash. There should be no hassle for using that medium. I find it interesting that JPM/Chase is willing to charge like crazy but pays low interest on accounts and it’s dividends are extremely low.

  3. Brandon March 10 at 2:55 pm

    If this doesn’t get people to leave BoA and Chase (for local banks, credit unions, etc), I have no idea what will.

  4. Uncle Joe March 10 at 3:00 pm

    The bigger question is…. why are you still banking with these banks??
    Obvioulsy they are not in it for their customers…. they are in it for the shareholders and their bonusues… but keep banking with these banks that truly care about their customers (sarcasm) !!

  5. Big Gus March 10 at 3:05 pm

    Anyone that banks with Chase is a sucker for punishment

  6. JR March 10 at 3:21 pm

    I’ve banked with Chase/Bank One/First Chicago for a couple of decades. I’ve never had problems with their fees because they never charged me any (due to direct deposits, minimum balances, etc.)

    I’ve had a United Airlines mileage card for a couple of years. I pay most of my bills with it…it earns the points, right?

    If they will cap me at $50, I will change banks. Or, I will pay everything by CC then pay off the CC. This will “cap” the amount of charges they see from me (see how YOU like it, JP)…

  7. Olivia March 10 at 3:31 pm

    “Joe Price, president of consumer banking for Bank of America, said in an e-mailed statement that the lower fee wouldn’t fairly compensate the bank for the infrastructure and services it provides to retailers.”

    So losing 1 billion dollars is too much??? The bank is this making 15 billions a year, that’s not enough for you??????????? F@cking greedy bastards!!!!! If they implement this I will be using the bank of my closet.


  8. Joanie March 10 at 3:40 pm

    I thought the original reason for debit cards was to allow consumers the convenience of a plastic card transaction while NOT incurring balances on credit cards. It is a perfect money management solution — you don’t spend more than you have, and you don’t have to carry large amounts of cash. Why would they take this away? Because they can’t make enough profit on each transaction? Meanwhile consumers struggle to control personal debt? Stupid banks.

  9. RoboKopp March 10 at 3:50 pm

    Chase should do a complete review of their business model. Since they can’t make money serving retail customers they should sell off the business to another local bank who knows how to value customers, yet still be able to make profit, albeit not an absurdly high rate that Chase needs to pay its greedy executives.

  10. SisterP March 10 at 3:53 pm

    Hey I know … why don’t we just start paying banks for the PRIVILEDGE of spending our own money? They can just charge us 4-10% for every dollar we take out … that way they’ll have PLENTY of money…oh that’s in addition to the money they already make off of our money while they “hold” it and loan it back to us for Mortgages/Car Loans/Credit Cards (some at 29%), etc. oh … and don’t forget those pesky ATM charges of $1- 1.50 at banks other than your own.

  11. Cosmo March 10 at 3:54 pm

    CASH IS KING!!! They’ll start charging us to cash checks now too.

  12. SwissBankAcct March 10 at 3:56 pm

    Time to consider an offshore bank – call it outsourcing MY MONEY!!

  13. DD March 10 at 3:57 pm

    So, they have to charge the retailers to pay for their glitsy, overly abundant branches? How much do they spend on their silly Double Your Deposit campaigns they run all the time? Cut out the fancy signs, the blinding video displays behind the tellers and get back to the business of being a bank.

  14. PointSpecial March 10 at 3:59 pm

    There’s a difference between debit transactions and check-card transactions… this story isn’t clear about which it is referring to.

    Debit transactions involve you entering your pin. Check card transactions are swipe and sign (like a credit card).

  15. JK47 March 10 at 4:08 pm

    This is revenge for the regulatory reform. This is about access to funds in your checking account which requires little to no infrastructure if you are accessing via a swipe at a merchant (certainly no savings to be realized by introducing a cap). Since they can’t fleece merchants on debit transactions they want to cap debits in order to shift the sales volume to the credit card side where they can charge 2% to 5% of the transaction cost while collecting interest on the balance carried by the consumer.

  16. PAUL March 10 at 4:17 pm

    Funny how now we are pushed back into the 1980’s prior to debit cards — start writing checks folks as a protest.

  17. Really? March 10 at 4:42 pm

    “But as part of the Wall Street reform passed last year, these fees are being slashed. The Fed is proposing rules that would cap interchange fees at 12 cents, starting in July.”

    “If a cap does make its way into accounts, consumers would be forced to write checks, withdraw cash from ATMs or put their spending on credit cards”

    We will thena gain have all of the problems that caused some of the issues with the Recession in 2008.

    “The whole model on the debit card side is in flux because of Dodd-Frank,” thanks Barney you troll!!!

    That’s the reason why. How inconvenient this will be if it does happen for all.

  18. Rick E March 10 at 4:43 pm

    $5 a gallon gas with a $50 cap on your debit card?

    No one will ever be able to fill their tank again.

  19. Rick E March 10 at 5:05 pm

    “The revenue banks get from interchange fees helps offset money lost from fraudulent transactions. So banks argue they won’t have the money to protect themselves against fraud with the Fed’s proposed cap in place.”

    They have insurance to cover losses and have no interest other than collecting the fees from the public and merchants.

    My wife’s purse was stolen and her debit cards were used until the accounts were empty.

    We happened to notice within 20 minutes of the theft. Looking online we realized that our cards had been used at 2 gas stations multiple times and also at one shoe store.

    We called the bank and canceled cards. We were told we weren’t responsible for fraud.

    Went to shoe store and got copies of sales receipts that showed the signatures were not my wife’s and not even the same last name as on card.

    Bank had no interest in filing charges. Didn’t even care that the merchant fraudulently excepted card with a male signature on a female card using completely different name. Told they had insurance to cover losses. Police detectives said unless bank pursued it they had higher priorities. Gas station had video of the cars that filled up because of their concerns over drive offs. The Bank & Detectives didn’t care about that either. Insurance would make whole.

    Now the public can’t use cards because they can’t recoop loses? Right.

  20. Ted March 10 at 5:12 pm

    I have been with Chase for many years, because I found that while they did not give me many perks (since money is always tight), they did not got out of their way to gouge me. I use direct deposit and only use Chase ATMs. But, if there is a $50 cap on debit card transactions, then I will have to go to a bank without a cap. Weekend shopping, involving nothing more than filling up the car with gas and groceries, easily goes over $100.

    The fact is banks do not make money off of good customers. They encourage customers to run up credit card debt. Then, when you decide not to use the credit card anymore, they make it difficult to use a debit card. This is an industry that was nutty enough to complain that it was too much work to first get permission from its customers for overdraft protection.

    I work for a small business, and every month we get a statement from our credit card processor, and the fees that banks charge us for the various credit and debit cards we accept. If we can pay less per transaction, our business will notice a significant savings. But I guess our concerns are less important than the banks’.

  21. Ticked March 10 at 5:19 pm

    Where is the help for the person on MAIN STREET ???
    We are being Taxed and Fee’d to death!

  22. Laughing at you all... March 10 at 5:31 pm

    Good article. I am glad to see that Chase took the first step to change the way debit cards work. The majority of all banks were sitting and waiting for someone to take the first step. For all of you complaining about these new fees, just drink the kool-aid you caused. I guarantee a lot of the posters here were the same ones complaining about overdraft fees and how banks are sticking it to the “little-guy”. Your government listened and enacted these regulations hence; the banks pass the fee back to you. Aren’t you all happy you’re the squeaky wheel?

  23. SwissBankAcct March 10 at 5:37 pm

    @Laughing at you all .. – you are by no means correct. You have no idea what my portfolio looks like, nor do you know my spending habits. I can assure you I pay my debt “in full” every month and I never had an over-draft. So before you rant and rave believing you are mightier than though, get your facts straight.

  24. Ted March 10 at 5:44 pm

    Laughing at you all:

    How about instead of speaking in generalizations, you come up with specific examples. Banks can still sell overdraft protection, they just have to get permission from the customer first. If you stand in line at the grocery store, with 10 items in your basket, do you expect the cashier to toss 5 more items into your basket that you did not ask for, and then have them charge you for it? That is how the system used to work. Market conditions change in every other business – IT, cars, retail. But banks think they do not have to react to changing marketplace conditions? They were entitled to those profit levels. And, it’s also interesting to note that an industry that depends upon the FDIC, a government agency, is now complaining about the government.

  25. Adubb March 10 at 5:56 pm

    Maybe I’m crazy but I swear I heard that the $50 wasn’t going to be a cap but a minimum. I assumed the banks wouldn’t make any money from the $3-$4 purchases so we would be required to spend at least $50. Did I hear incorrectly or is this article wrong?

  26. Jo the builder March 10 at 6:04 pm

    The hell with them put all your money in safety deposit boxes end all bank accounts or hide it were you can . the less the G knows the better for us . they will try to make us use credit cards more so they could get more interest that is Y there are trying to put a cap on debit cards. now they stop the rewards program were you would cash points in for money .so be a step a head

  27. Anthony RO March 10 at 6:08 pm

    This is outrageous! I bank at Chase and have never had a credit card in my life. I own my own home and pay for all purchases with cash, debit card, check or online. And to think I might not be able to use my debit card to buy groceries because they are not making a mega-profit? Enough of this B—S—. I suggest we all descend on members of congress with emails and pass it on thru-out the country. If Chase does it, they all will.

  28. leonard hamilton March 10 at 7:31 pm

    Bill Daley is Chief of Staff for Obama, he used to work for Chase, maybe he can explain this after all he has made almost 20 million from them. Or is that too much to ask?

  29. Don March 11 at 2:40 a.m.

    I think the Feds needs to change it from 44 to 25, not 12. A lot of jobs will be lost because of that move. I love the idea, but when banks stop issuing cards and\or limit the amount you can spend per day, people will stop spending, and that will hurt businesses. There are also a lot of Merchant ISO’s out there that will go out of business. Regarding Chase, I am not surprised that they are one of the first to do it, they could care less about their customers, but at least they are honest about it and up front. LOL.

  30. Kathy March 11 at 6:00 a.m.

    Hey, no problem, I will just use cash instead. Take that you dumb banks! Push people too far and we will all start pulling our money out of the banks!

  31. Jim March 11 at 7:03 a.m.

    I have never been a fan of debit cards. But then, I pay my credit cards off every month, and I have perfect credit. Banks make a ton of money every time I swipe my cards. An absolute ton. I’ve been subsidizing the folks whose credit is poor.

    Still, the banks are in a serious quandry. They’ve built a system with debit cards that leaves the old check-writing system in the dust. It is faster, cheaper, and safer. They just got way too greedy. Now, they have to find some way to avoid having customers revert to checks. It’s not gonna be fun.

    The folks who say “a lot of jobs will be lost” every time the government takes any action whatsoever have begun to tire me. I ran a small business for a number of years. The government’s actions were of little consequence to me. The government doesn’t gain or lose jobs, frictional unemployment aside.

  32. BDub March 11 at 9:14 a.m.

    Those of you blaming the banks for this change are missing the point. You should be blaming Senator **** Durbin. At the last minute, he put an amendment into Dodd Frank that limits how much banks can earn on debit card transactions. In most cases, the limit imposed is less than the banks’ cost to process the transaction. This is great for big retailers (think WalMart) who no longer need to pay these fees but bad for the banks. Debit card processing fees were a big contributor to many banks’ profits. Because the federal government has taken this source of revenue away, the banks must find other ways to make money. The banks aren’t not-for-profit charities. This is what happens when the government fixes prices. You’re right to be angry. Just direct your anger in the right direction.

  33. Rob J March 11 at 9:24 a.m.

    Go join a CREDIT UNION, they don’t as many fees as the big banks! CREDIT UNIONS care about you, banks don’t!

  34. John in Glenview March 11 at 10:21 a.m.

    So now checking accounts and debit cards will go the way of airlines:

    “I would say one of the most important changes that we will consider in our business model, in the new environment, is an unbundling of the services that we currently offer and price for,” Byron Pollitt, Visa’s finance chief, said in September. “I think this will lead to more a la carte pricing and more pay for the services based on the value that it creates for the merchant.”

    At least it appears that credit unions can be the Southwest of this mess.

  35. margaret ryan March 11 at 8:33 pm

    The government allowed JP Morgan to bail out Chase rather than let the market forces decide. Therefore, Senator Durbin is calling in his favor — which is to ‘payback’ JP Morgan for helping us out during the economic crisis…Thanks Senator Durbin

    JP Morgan aka CHASE…is consumer/retail BANKING…credit cards/debit cards…

    Switch to Bank of America, Wells Fargo, but move all your money out of CHASE and any other JP Morgan corporation…

  36. Janet March 14 at 5:18 a.m.

    This is an attempt by the banks to quell the monster they created.
    The bank’s original idea behind ATMs was customer “self-service”. Really it had nothing to do with customer convenience but more of a way for banks to save money by cutting in-branch staff and also with the idea that a machine didn’t need to get paid and it worked 24 x 7.
    When the banks realized that in-branch visits did not decline as much as they counted on, some of them started imposing fees for just walking in a branch and conducting business. They also discovered that maintaining the ATM machine still took a human to put money in it, fix it when it broke, needed huge, complicated data systems and networks to run them, etc., so they started imposing fees for using it as well.
    Then the banks, like addicts, got hooked on the the extra money that was coming in and needed more to support their habits – read: huge yearly executive bonuses. So they found new ways to impose fees, got more addicted and so on.
    Along the way, they got us addicted as well, to the ATM and debit card.
    Thank goodness the government is stepping in to try to stop the madness.
    First I suggest we all not panic. As the article above states, the proposed cap on the interchange fee is just that, proposed. Nothing is set in stone yet.
    Secondly, regardless of what the outcome is of the proposed new rules are, we have a choice of where we bank. If your current bank is silly enough to tell you that you may not access ALL of your money in your checking or savings account for purchases, then take your business somewhere else.

  37. Mamma Jamma March 16 at 7:30 a.m.

    If BofA caps my debit card my response will be to close my accounts, stash my cash, pay bills via money order which won’t be much more expensive than the outrageous fees the banks intend to put in place. I already operate on a cash only basis outside of paying my bills. Pay the bills and pay myself a certain amount of cash for groceries and gas, the rest is stashed. I loose money on my savings account every month to fees, why should I keep it? Paying fees larger than the amount of interest paid no longer makes it a “savings” account does it? Stupid banks. Don’t need you and certainly won’t pay your stupid fees.