A short five years ago, banks were pushing us to use our debit cards. Rewards programs with points, flyer miles, cash back — it all added up in our favor.
Now, however, if you have a debit card that’s part of a rewards program, you might have a limited amount of time to cash in those rewards. If your debit card is with a big bank, your rewards program is probably going to be cancelled — if it hasn’t been already.
The reason for these changes, say the banks, is the Durbin Amendment. The legislation puts a cap on the per-transaction cost that banks charge merchants for each swipe of a debit card, down from 44 cents to 21 cents per swipe, plus a percentage of the transaction total. No more massive millions moving into card issuers hands in the form of swipe fees means no more rewards-program benefits for you.
Banks are looking for new ways to recoup the lost money. If you get an information leaflet in your bank statement, read it. You could learn that your free checking account will no longer be free, or that you’ll need to maintain certain balances for it to be free, or that you’ll be limited to a certain number of debit-card transactions per month, or that your ATM transactions are no longer free, or that you’ll no longer receive a paper statement without paying for it.
However, that same problem for card issuers might get you a discount from merchants, especially for big-ticket items. If you shop locally at smaller businesses, you have a better chance of asking for and getting a discount, since the merchant won’t be paying high swipe fees and percentages of the purchase cost. Always ask.
Banks and credit unions with assets less than $10 billion are exempt, and if you switch to a smaller bank, you might get a better deal on the fees that the big banks will surely impose.
Before you let yourself be pushed toward putting purchases on your credit card because of a potential rewards program, rethink your plan. While new laws are in place for credit-card fees, you still have to pay the money back.
The new debit card law takes effect in October, just in time for holiday shopping.
David Uffington regrets that he cannot personally answer reader questions, but will incorporate them into his column whenever possible. Write to him in care of King Features Weekly Service, P.O. Box 536475, Orlando, FL 32853-6475, or send e-mail to [email protected].
(c) 2011 King
