What Durbin's Amendment Means for Your Debit Card Use

We’ve been discussing banks, credit unions and banking regulations quite a bit here lately. On theme, Debbie from MyBankTracker.com submitted an informative guest post on the subject of the Durbin Amendment and its impact on debit cards. You can learn more about Debbie immediately following the article.

You’ve probably heard about new debit card fees banks are charging or planning to charge their customers for debit card use.  Bank of America is leading the pack with plans for charging customers $5 a month for debit card use anyplace other than the ATM.  Other banks are predicted to follow suit – but why the sudden increase in fees?

The Durbin Amendment

Durbin Amendment is part of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, and went into effect on October 1st.  It changes the limit of swipe fees banks charge merchants when they accept debit cards as payment instead of cash.  Previously, banks could charge merchants up to 45 cents per debit card transaction; but The Durbin Amendment currently limits the swipe fee to about 22 cents per transaction.

Bank Response to Debit Card Fee Swipe Limits

Banks felt this change would cause them to lose 50% of their revenue from debit card transactions, and began looking for ways to recover from that loss of income.  Bank of America intends to add the $5 monthly debit card fee, but other banks are talking about changes to checking accounts and debit card rewards programs in an effort to recover their lost revenue. 

According to research conducted by MyBankTracker.com on the changes to debit card rewards programs, the following banks reported:

  • Chase Bank: ending the rewards program it maintains with Continental Airlines
  • Bank of America: no changes to the US Airways rewards program  
  • Wells Fargo: ended new enrollments to their rewards program on March 20th
  • Wachovia: ended program March 27th
  • Citigroup: ended rewards program enrollments on June 10th
  • JPMorgan Chase & Co: ended enrollments on July 20th

What Should You Do About Bank Changes?

Take a look at how your current bank is responding to The Durbin Amendment.  Will they keep their reward programs for checking accounts and debit card use or are they canceling them? 

Change banks: If you currently have a free checking account with a debit card you use frequently and your bank is looking to add a monthly debit card use fee and/or cancel the rewards program – you may want to consider looking at a smaller bank or a credit union.  Many online banks are not reacting to the changes and will continue offering debit cards for free.

Stop using debit card: Alternatively, you can continue with your existing bank even if they charge a debit card fee and simply stop using your debit card for making a purchase.  Write a check instead.  Consider using a credit card for each individual purchase throughout the month and then pay it off in full when the statement comes – or send your credit card account extra money to get a ‘credit balance’, and use your credit card like a debit card. (When the money is gone, stop spending until you send more!)

Debbie Dragon is a financial writer for MyBankTracker.com, a site that helps consumers compare savings accounts, CD rates, and home equity loans to make informed banking decisions and save money.

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