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Debit rewards will soon become a thing of the past–unless you use a small bank. A law that takes effect in July will cap debit swipe fees for banks that have more than $10 billion in assets. From Bloomberg:
Visa Inc. and MasterCard Inc., the world’s biggest payment networks, set rates charged to merchants when consumers use debit and pass that money onto the banks that issue the cards. For larger banks, a cap of a flat 12 cents instead of the average 1 percent of the purchase amount means about $12 billion in lost revenue, and a possible end or restructuring of debit rewards.
The Dodd-Frank legislation that overhauled the financial industry last year mandated setting a cap on debit-card swipe fees to help merchants who said they were powerless to negotiate rates with the payment networks. The Federal Reserve has until April to decide what the cap will be before being implemented July 21, 2011.
If larger banks do maintain some debit rewards, they may make changes including offering limited perks only to the wealthiest customers and requiring more spending or larger deposit balances to attain rewards, said Hewitt of Mercator. They may also end cash-back programs because they’re the most expensive and charge fees for use of debit cards, she said.
So far, swipe fees don’t apply to the credit card industry, meaning your rewards programs will stay intact for the foreseeable future.
Free checking is also becoming a thing of the past at big banks, many of which are now enforcing minimums that, if you don’t hit them, cost you fees.