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A $50 spending limit on debit cards?

Some big banks are considering restricting the size of debit card purchases. It's part of their response to proposed federal regulations.

By Karen Datko Mar 16, 2011 12:17PM

What if your debit card no longer worked for purchases exceeding $50 or $100?


That's one of the ideas big banks are floating as they battle a proposed limit on how much they can charge merchants each time you swipe your card.


This idea isn't going over well in all quarters. Wrote The Budgeting Babe:

Talk about alienating your customers! I use my debit card for everything -- including monthly automatic bill pay for a few accounts that definitely charge more than $100 per month. And now the banks want us to use credit for that. Credit?! Just when America was learning to wean ourselves off our credit cards!  (Post continues after video.)

Under a proposed Federal Reserve rule -- implementing the Durbin Amendment to the Dodd-Frank financial reform law -- debit card "swipe" fees couldn't exceed 12 cents, regardless of whether you say "debit" or "credit." Merchants now pay 1% to 2% of your purchase, or an average of 44 cents, each time you use your debit card.


Needless to say, banks don't like this rule. Bank of America says it will lose $2 billion a year if the swipe fee is reduced. Chase says it will lose $1.3 billion. (Small community banks are exempt from the rule.)


Banks have floated a number of ways to compensate for the loss of debit card swipe revenue. (Could they be trying to drum up public support for their fight to get that part of the Dodd-Frank law repealed? A bill to put the swipe-fee limit on hold for two years so it can be studied some more has been introduced in the U.S. Senate.) Some of these have been implemented or are being tried out:

  • Charging a monthly fee for debit cards.
  • Ending rewards for debit card use.
  • Issuing prepaid cards. There is no limit on swipe fees when we use them.
  • Charging fees for checking accounts that used to be free. Many banks have already begun doing that.

And now there's the idea of the $50 or $100 limit on debit card purchases, reportedly under consideration by Chase and who knows how many other big banks. (None will comment officially about it.) A recent story explained the banks' rationale:

The revenue banks get from interchange fees helps to offset money lost from fraudulent transactions. So with the Fed's proposed cap in place, banks argue they won't have the money to protect themselves against fraud. And, of course, the bigger the purchase the bigger the risk, so banks are considering limiting consumers' ability to pay by debit card.

Keep in mind that if there's a limit on the size of debit card purchases, you'll likely use a credit card, which, like prepaid cards, aren't subject to a swipe fee limit.

The Durbin Amendment says debit card swipe fees must be "reasonable and proportional" to the banks' actual costs of processing the transactions. The Fed, which is generally very attentive to banks' concerns, will finalize the regulation in April. It would take effect in July.


Jeremy Vohwinkle of Generation X Finance said a limit on debit card spending could be harmful to those who can't use credit cards responsibly:

But the real problem comes when people who switched to debit cards to keep themselves  from going into debt revert back to credit cards for their transactions. They may be able to pay off those transactions in full every month, but if they've had problems with debt in the past there's a good chance spending could once again get away from them and unravel everything they've worked so hard to control.

What would you do if your bank set a limit on the size of debit card purchases? I know I'd be seriously looking to change banks or, perhaps, join a credit union. Credit unions are owned by their members -- unlike enormous banks, which are focused exclusively on profits -- and often offer better services and lower interest rates.


The Budgeting Babe said that if Chase goes "through with this, it will be the tipping point for me to switch banks."


More from MSN Money:

Mar 17, 2011 12:56PM
I will be a cold day in hell someone tells me what I can and cannot do with MY money!!!  This is a DEBIT card not a CREDIT card, I'm not borrowing anything from them.  I'll just carry cash or write a check.
Mar 16, 2011 4:43PM

W. T. F???


I keep way more than $50 in my account, and the major reason I have the debit card (other than the day-to-day convenience) is for the liquidity if I needed to use a bunch of that money in an emergency.


This one's for you, B of A.  You have been pretty good to me but if you even think about doing this, I am warning you, I will drop you like a rock.

Mar 16, 2011 3:01PM
love my credit union and i'll never give big banks my business!
Mar 16, 2011 1:18PM
This is complete B.S.!
I will leave my "mega bank" and only use cash.
Any way these banks can find to ripe Us off they will.  But actually they will lose customers because of their greed and stupidity.
Excuse me, didn't our stupid government bail them out recently?
This just makes me sick!!
Mar 17, 2011 1:23AM
We were seriously considering moving to a credit union anyway. If this is implemented, it may come sooner than planned. 
Mar 17, 2011 1:54PM
I bank with Bank of America and use only a debit card, don't carry cash. I have a single credit card for emergencies. I have easy access to a credit union, if Bank of America resorts to limiting debit purchases to $50 or $100 I will absolutely pull my money out of Bank of America and go to the credit union. I currently have over $20,000 in a Bank of America savings account and another $10,000 in my checking. The only reason I haven't switched already is that Bank or America is slightly more convenient for my wife, I think she could deal...
Mar 16, 2011 9:58PM
The fact that they're even THINKING this is an option is reason enough for me to seriously look into changing banks. Beware Chase. I put up with your BS when you took over WAMU, this is will be the end of it. Period.

Mar 17, 2011 2:08PM

This is nothing more then a scam the larger banks are doing to the American people to force us to use credit cards that have larger fees instead of Debit cards.


Its so clear even a blind person could see this.  They put a ridiculously low limit on current debit cards so if we want to make a large purchase, we are forced to use a credit card with a huge interest rate, depending on credit.


I think, these major banks will do this regardless of what we say here and according to one reader, they have already limitied his debit card.  We as people need to take a stand against these banks.  Dont wait for them to announce this change or actually make the change, drop your accounts with them and go to a local bank or small town bank.


Since they won't listen to our words, then all we have left is our actions which can speak louder then words in some situations.  When they start to see hundreds of thousands of people dropping their accounts, they will know then they have made a huge mistake.

Mar 17, 2011 12:59PM
The day the banks do this, I will close my account,and start paying cash for everything.
Mar 17, 2011 1:45PM
The credit union campaign that was mentioned is alive and well.  I had 4 CD's mature in the last 3 months...I cashed them all and deposited them into credit union CD's...and at more than twice the rate the banks could offer.  I'm now moving my checking account also...the heck with banks and all of their fees.   
Mar 17, 2011 2:04PM
We bail the BIG banks out and then they want to turn around and charge us for using our money. This world never ceases to amaze me. I don't even have a credit card anymore. I would immediately change to a credit union. Which after hearing this I may anyway. There has to be a way to make the big banks pay----I guess loss of business would be effective??
Mar 17, 2011 2:16PM
I use Chase bank and almost left a month ago because they instituted a monthly fee if you did not have at least 1 direct deposit over $500/mo.  At the time I was collecting unemployment and my deposits were under $500 each so I would have been charged the fee.  Luckily I secured employment right before this was instituted so I meet the free checking requirements.  Now that Chase is considering a debit card daily limit, I will definitely leave their bank as soon as they decide to do it.  I honestly stayed with them only because of the inconvenience of changing automatic payments, getting new checks and cards, etc. and restarting a direct deposit...pure laziness since the direct deposit issue was a moot point.  This is just another reason never to bank with corporate banks and keep your money in your community!!
Mar 17, 2011 1:19PM
Love to use cash. Walk into the bank though with a check for $5,000 dollars and ask for cash. They look at you like your trying to rob Fort Knox. They never " have enough money on hand for that amount " or find some other lame excuse about the check clearing or 2 days delay. Even with a larger balance on hand, they find excuses. I'm not into banks at all. Bunch of theives. If they can keep my $5K for an extra 24 hours, they can earn interest on it. The last thing thye want to do is give out a large amount of cash.They trashed our economy with risky loans and were propped up by the taxpayers and now want to hose us again - and nobody went to jail. Credit unions and cash are king and these banks - all of them - are run by crooks.  
Mar 17, 2011 1:50PM
I'm already being charged a stupid fee for a checking account that used to be free. If Citi goes along with this BS, you bet your a$$ I'll be taking my business elsewhere. This is such crap! Why don't banks just stop being fake nice and give us all the finger when we come in there to do business? At least I'd know what they're really about. Just keep punishing your customers for the mistakes YOU made, thats right.
Mar 17, 2011 12:49PM

This just takes the cake.  I have been with Chase for years, and to be honest, I have had great service.  But I have always kept my Credit Union Account too, just in case I had to leave Chase, I would have another option I could switch to quickly. 

If they want to limit my purchases, then I will switch in an instant.  The day after they make the announcement, I will bail on them.

Mar 17, 2011 1:29PM
The best way to deal with this, is to use a local credit union. No fees with them.
Now I have heard it all.  I use my debit card for everything.  I don't like to carry cash.  This is ridiculous. 
Mar 17, 2011 1:37PM
CREDIT UNION. Do you hear that Bank of America.
Mar 17, 2011 1:40PM
Really?!?  How far does 50 bucks go when filling the gas tank or a cart of groceries?  Limit my debit card and I am moving all my cash from Chase (  I miss you WAMU!! ) and heading towards BECU.
Mar 17, 2011 1:46PM
I haven't had a credit card in ages. I'm certainly not going to get one now. BOA can just kiss their customers good bye if they limit the amount you can pay for on debit cards.
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