Debit Card Limits
 

I thought this was interesting. If $50 or $100 limits are put on debit cards a lot of people are going to be very unhappy. I know a lot of people in an effort to get out of debt have cut up their cards and use debit exclusively.

With current gas prices if it was dropped to $50 you couldn't even fill up. At Costco you could just use a check but you couldn't get gas. And traveling would be impossible.

Personally I don't use my debit card for much more than Costco. I like using my credit card for the security. If someone steals it and runs it up I'm not out the cash till it all gets straightened out. And I get the bonuses for using it. I do pay it off monthly in full.

Eek, we use our debit cards for so much. Groceries, especially. Though because we shop at 3 different stores (whee, budget) we probably don't hit the $50 mark per store.

Still, limits would be a huge pain. I'd rather pay a monthly fee than have limits on debit.

Would this be applied to the limit you can get at ATMs? I believe for most, that's $200 per day. How could they make that different for purchases only?

I'm sure people would balk at not being able to get $50 from their ATM.

I think it's purchases only. I have different limits on my debit card for purchases and withdraws currently. The ATMs are bank owned, so it's not costing them more. Unless you use another banks ATM and they both charge you a fee.

So far my credit union hasn't changed their operating practices in response to any of the legislation.

I wonder if this would also include debit cards that are used as a credit card. Most of my transactions are using my ATM card as a MasterCard.

What a huge pain. I only use my debit card. Thank god for credit unions... if WF tries to join Chase in this, I'll just drop them.

I have no knowledge of this specific proposal (for anybody who might wonder) so can't say how potentially real it might be (since all kinds of ideas are proposed all the time for evaluation).

But in general I think this statement of things would be fairly uncontroversial:

When an industry offers a new service as an alternative to an existing service primarily due to the profit of the new service, and then the profit of the new service is dramatically reduced compared to the profit of the old service, the industry is going to try to move customers back to the old service.

Debit cards were not created by banks for altruistic reasons. Congress has now eliminated (or reduced) many of the non-altruistic reasons they existed. So, it may be evil to one's view of things, but banks are then going to prefer people move back to credit cards (or secured credit cards, also not capped).

And having had many interactions with our risk groups I'm sometimes amazed that debit cards were ever allowed to exist in the first place.

And you're going to see a lot of changes.

Much of the free or cheap services offered by banks were essentially subsidized on this model:

We will charge high fees that are generally avoidable but will bring us lots of money from people who aren't good at managing their money. This actually makes poor and/or stupid people profitable so we'll offer deals to draw them in that are going to be really good for the people who are smart with their money.

Congress has essentially said (and I'm not saying they were wrong to do so): "It is wrong for you to be making your nut off the poor and/or stupid people so these new rules will prevent that."

But it does mean that the poor and/or stupid people will no longer be subsidizing the benefits to the smart and/or rich people.

That's why checking became free almost everywhere. Because free checking meant poor and/or stupid people who generated a lot of fees. The fact that smart people also got free checking was just a bonus. Get rid of the fees (as Congress recently did) and checking won't be free for much longer.

Also expect to see debit card reward programs to change dramatically in the next couple of years as the business model on those is maximizing card swipes and to the extent that an individual card swipe is no longer so profitable there is less reason to encourage it.

Wait: are you trying to say that banks want to make money?!? How greedy of them.

Greed is as greed does.