By: Jessica Zimmer, Debt.com Financial Fitness Trainer
Banks are set to charge you fees to use debit cards because they soon may get less money from merchants. The Federal Income Reserve has proposed new restrictions on charges that debit card issuers can make to merchants. By the end of April 2011, banks may make up to 84% less than they did before on “swipe fees” from merchants. Politicians have proposed bills to ask for more time to consider and possibly change the restrictions. The negotiation between merchants and banks, as mediated by the government, appears to be an ongoing process.
If the restrictions take effect, banks may cancel certain debit cards or impose fees on debit card holders. Banks may also cancel rewards programs for debit cards. If banks drastically change how they view debit cards, they may even cut the link between certain debit cards and checking accounts. This is especially true for checking accounts with terms that require the account holder to use their debit card a set number of times per month.
Banks’ proposed changes regarding debit cards reveal that they have been favoring debit cards only because they were making enough money from them. During the past few years, banks have encouraged consumers to open checking accounts that are linked with debit cards. They have lured customers away from credit cards with the promise of less debt. Getting consumers to use debit cards has been a difficult task when many people have little to keep in their checking account.
If you are wondering whether you should continue to use your debit card, pay close attention to any notice of changes in fees or rewards programs from your bank. The good news is merchants may cut prices to avoid fees from the banks. The economy is still far from perfect and merchants want to increase sales. If you pay cash, you may get a discount for your items.
Also, you may be pleased if debit card rewards programs become more merchant-driven. Even though merchants pay banks a fee when a customer pays with a debit card, the fee is much less than when the customer pays with a credit card. Merchants may offer reduced prices to those who pay with a debit card, especially with a bank that they favor. Merchants may also partner with banks to provide rewards to repeat customers to keep them coming back to their favorite stores, restaurants, and airlines.
© March 30, 2011 // Copyright All Material 3/30/11 by Jessica Zimmer
Right on!