Chase To Cap Debit Card Purchases At $50 or $100?

Chase To Cap Debit Card Purchases At $50 or $100?

JPMorgan Chase has announced that they are considering a spending cap on debit cards of either $50 or $100. This would be in effect whether you purchase in person or online, and regardless of whether you run your debit card as debit (using a PIN) or credit (using a signature, or the CVV).

Why?

First, and most obviously, because they are evil and they hate us, and want to squeeze every cent from our dry, brittle bones.

How else to explain that, in exchange for bailing their asses out last year, they now want to cap our purchase amounts? Keep in mind that banks only stay alive because we give them our money in the first place. Now they don't want to let us have it back for more than a hundy a pop?

Nice.

Their rationale is, of course, more abstract. And more befitting a bunch of guys in pinstriped suits. It's all about fees, you see, and the fact that they could be making more money off of them.

Every time you use your debit card at a store, your bank charges the store for the privilege of getting paid. (This is why many small businesses are reluctant to get card services - it can take a pretty big bite out of your business, especially if you sell low-value items like espresso drinks.)

Today, those fees average out to 44 cents per transaction. This generates $16 billion dollars a year for banks across the board. That's a lot of cash! (Which they are making off of YOUR money.)

However, some of the Wall Street reform legislation which was passed last year would cut those fees, capping them at 12 cents per transaction.

Faced with the prospect of making slightly less money (off of your money) than they did before, Chase is considering the only sensible option: punishing the consumer. According to Chase's logic, if they can't charge stores more than 12 cents per transaction, then they will cap the transaction amount to whatever 12 cents amounted to before. Which is to say, $50 or $100.

And don't think that closing your Chase account will help you on this one. Make no mistake: if Chase manages to successfully put this into effect, every other bank will quickly follow suit.

How will this ultimately shake out for you, the consumer? It will no doubt push people towards using credit cards more often, which is a bad thing. Americans already carry an average of $10,700 in credit card debt per household.

Others will start using cash and checks for bigger transactions. $100 frankly isn't that much - an average family can top $100 at the grocery store without raising an eyebrow. As far as we have come, technologically speaking, and the banks may force us to stand at the register filling out a check LIKE SOME KIND OF ANIMAL.

More worrisome, this will undoubtedly cast a big chill on online transactions. Want to order a new iPhone? Buy a computer online? Get that pair of Nikes you've been eyeing? If Chase has their way, you won't be paying for it with your debit card.

Photo credit: Flickr/Tony Webster