JP Morgan Chase is considering capping debit card transactions to $100 or even $50. It's all about fees they charge per transaction, currently $.44 and proposed to be slashed by Congress to $.12.
That's a big hit for banks, yes.
But after years of "training" us to swipe our debit cards instead of paying with cash, now we're being told "NO DEBIT FOR YOU!"
Excuse me. This is MY money in the bank, right?
And the bank is telling me I can't access more than $50 at a time with my debit card?
Wow. Capitalism as controlling as communism!
What do you think the impact of this will be?
a) People will go back to using cash (good)
b) People will go back to using checks (ok I guess)
c) People will rely more on their credit cards (bad, bad, bad)
You can thank Obama for that and his stupid regulation which is forcing banks to make these changes! But sure blame the banks if you want!
As opposed to the deregulation Bush did with the backing of meryll lynch which threw the entire world head first in to a financial crisis, as the deregulated banks hiked interest rates, foreclosed on homes which they couldn't previously, etc etc.
I would imagine most people would go back to cash. I have absolutely no sympathy for the banks as you a big hit for them in charges.But you know they will have something in the pipeline to recover any lose enforced on them by politicians,and it wont be the politicians and banker's that are hit hardest by it.
I hope people go back to using cash. That way the banks won't get a slice of the pie. But as you know, banks will find a way to fine us for using cash instead of those expensive credit cards. You have a valid point with this question. Thank you!
It's strange that you say "Capitalism is as controlling as communism" when this consideration by JP Morgan is a reaction to new "Government Regulations/Restrictions" that attempt to control the fees that banks charge retailers when you choose to swipe your debit card. Specifically the new regs put bureaucrats at the Federal Reserve in charge of the debit card strategy implemented by banks. This is an example of the unintended consequences of socialism not capitalism.
With that said, as I have pointed out in my "8 Hard Truths About Personal Finance" hub, if people don't like the practices, fees, service, or anything else at their bank, they can and should find a different one. Many community banks and credit unions charge lower fees anyway.
Soon, the debit cards and credit cards will no longer work at ALL....
Have cash on hand - soon banks will impose withdrawal restrictions too.
Bet on it all.
Maybe they're taking Chris Rock's classic joke about people withdrawing money too seriously. As I seem to remember him saying something along the lines of:
"Have you ever met anyone who needed to make a withdrawal for 300 hundred dollars, at 3 am in the morning, for something positive?" Sorry, I don't mean to make light of the situation MM, as I do apologize for that. Anyways, I do think it's messed up that the bank would do that, as it's really your money to do with as you please. Plus, what if an emergency happens? A bank can't possibly expect you to have to ask for permission to use your own money if more than the daily allowance is needed during a emergency.
ive always swiped my bank card as credit and cant tell from this article if its the debit cart (bank card w/ debit/credit branding) or the transaction "debit" that will be effected.
i have accounts with 3 of the banks mentioned - looks like time to open up a citi also
That's the way we use ours, too--only as a credit card, to avoid the debit card charges that some places have, but also so I don't have to punch in a pin number all of the time...
Putting a limit on debit charges is ridiculous, though!
MM--Your bank holds out $75 to $100 for a fuel charge? Ours does the opposite--it only shows $1.00 on our account, until the charge goes through!
Thats not a bank practice , its a standard hold placed by the business IF you swipe at the pump.
The hold drops off in a couple days.
If a customer swipes at the pump - the vendor has no way of knowing what amount of gas they will pump beforehand so has to protect itself with a standard hold. One could swipe and fill the tank with $75 in gas on a pre-paid card with only $5 on it and the vendor would have no recourse.So a standard hold is always applied..most dont even notice unless they check their online banking at the right times.
Hotels often follow the same model
I do believe you, sunforged, but it's not something we have happen to our account, and we always use our debit card as credit when we pay at the pump...
I check our account a couple of times a day, to keep track of our expenses, since we don't have a lot in there at one time, normally--just enough to cover bills, so I would notice the drastic drop in the amount!
Odd how some places do that, and others don't though.
Good point, sunforged.
Some places I go they charge a $.45 fee to use my card as a debit card. This makes sense, as the vendor is simply recouping the $.44 fee they pay to the bank for the swipe.
This is all I've heard/read so far.
Not sure what happens if you swipe your debit card as a credit card. Interesting point.
One phenomenon I have noticed on credit card transactions -- especially at gas stations, car rentals and hotels. They put a "hold" of a certain amount on your credit card. So if you pump $55 worth of gas you also have a $75 to $100 "hold" on your credit card that stays on there for a few days after the transaction.
Now, if you are someone who lives on the edge of your credit limit, that $100 hold charge could wreak havoc for your next transaction....
the main card I use is from a credit union, but I almost always select to pay by credit with my debit card.
I would think people affected may start writing more checks, but some companies/services no longer accept personal checks.
Aw, poor babies. Daddy took their candy away.
Insurance companies, big pharma, banks, oil companies --
All of these industries ream consumers on a daily basis. And you want them all to regulate themselves. Is that correct???
Smart regulation is all that's required... the kind that prevents fraud not regulation that is nothing more than the government telling them how to run their business which usually only has the effect of raising costs on the business which they pass along to you and me and expands the government bureaucracy which of course you and I pay for yet again and finally they don't work or worse they create a new problem which then government has to step in again! The banks warned us when Obama that this would happen so no one should be surprised. This is the same legislation that taxes all transactions to create a bailout slush fund for troubled banks! Face it your guy is an idiot!!
Best form of regulation comes from the market. Educated consumers who make disciplined decisions that is in their own self interest is the best cure for out of control banks.
Don't like high fees, then take your money to a different bank.
Too many restrictions on how you use your money, then change banks or use cash.
People should also complain at their elected officials for passing such anti-consumer / anti-business laws!
Surely this can only be for purchases on a debit card where credit is selected?? In Australia some retail chains will not allow you to select 'credit' when purchasing with a debit cards they are charged per transaction that has must go through a credit network (visa, mastercard), so you must press the 'savings' button instead, which charges the same account, just doesn't go through a credit network.
You would have to think that if this forces more people to carry cash, then sticking someone up for their cash is going to become a more profitable crime, for those inclined to do it.
Maybe the government could hit the banks with a small tax relating to their contribution to an increased risk of personal cash related crimes.
Im thinking the opposite
when debit is selected the charge falls on the bank?
when credit is selected the charge falls on credit company?
here is the states, using your card as debit has always led to a charge by either the merchant or the bank
using it as credit is always free
Do yourselves a favor. Pay everything with a rewards Credit Card, and just pay off the balance each month.
For me, the answer is "back to cash". I just have to develop the discipline that keeping cash does not mean that I should just spend it. What I have noticed though is that more businesses are placing a minimum purchase amount on debit card purchases.
I use cash. No way of overspending or incurring fees or going into debt. What's so bad about that?
O.K., well....as I type this I realize I have a cable/internet bill in order to type. Obviously I don't send cash to the cable company.
I pay through my checking account, with online banking.
If you use your debit card as a credit card, you still are only drawing on what you have in your account, so really, it's not that much different than using cash.
I held out for a long time, but now use it most of the time, because it gives me a better record of where our cash is actually going, and I can keep track of it in our online bank account.
The Limit JPM is considering would not apply to online bill pay transactions as far as I know. Only debit card transactions that are physically swiped. Still it's a bad idea prompted by poorly thought out and inappropriate government policy.
Thanks for the explanation, sunforged.
It seems to be only certain gas stations that do that.
It happens to my husband all the time when he pays with the Am Ex card. When I go online to see where that credit card is at with activity, I see the charge. Always from gas stations.
They claim it's not a real "charge" and I have yet to have a problem going over limit because of the gas station's hold charge. But it is annoying.
Now I understand why.
As for hotels, I recently had a horrific experience with a hotel that put the hold on my credit card. When I checked out they charged my card for the stay. When I got home I saw that both the charge for the stay AND the hold were both on there. The hold stayed on for 10 days! It did NOT automatically "fall off." I had to complain to the hotel (they were clueless as to what to do) and to the bank that issued the credit card.
Amazing what a raving lunatic I can become over $158 and change
Like Sunforged said, hotels, gas stations and also rental car companies put credit holds on your card that can take up to 14 days to clear. As a matter of fact, if your credit card is ever stolen, the thief will probably take it and head right to the gas station. They swipe the card at the pump just to make sure that the card is valid and has some money available on it. If you ever get a new credit/debit card and make your first purchase on it at the gas station, expect to hear from the bank's security department rather quickly. If you don't, you might want to switch banks.
You can minimize these holds by paying for your gas inside the station instead of at the pump. Hotels often put a hold of several hundred dollars on your card to cover any possible purchases like in-room dining, pay-per-view, phone calls, etc. Just stop by the business office after you check out and request that they release the hold. All they need to do is make a phone call and the hold is usually released fairly quickly.
It sounds like a semi clever ploy for more fees to me.
Most people will either use a credit card or checks - few carry much in the way of cash any more.
Credit purchases will inevitably result in more interest payments to the bank (on the average).
Few people can manage to balance a checkbook any more. Overdraft fees will go right back up - they will just be from a check instead of a debit card. Returned check fees will also increase.
The banks want more income, and this sounds very much like an under the table effort to get it. Within the law, but resulting in the same fees they can no longer get.
That stinks. I'm already a little annoyed that they don't let me debit more than $300 a day.
I don't want to carry a bale of cash when I go shopping, and since I live far from town I go to the grocery store, hardware store, pharmacy,office supply, feed store and nursery and a few other places all in one trip. Oh yes-- gas station, too.
It's my money and I have enough to cover all of my purchases.
Kinda defeats the purpose of automatic checkout, doesn't it?
When the hotel compiles your bill and slips it under your door, it's a convenience. It means you don't have to go to the front desk.
It should not be your responsibility as a guest to go and ask to have the hold taken off. Once they "cash out" your account THEY should take off the hold automatically.
We're talking about using your debit card to access money that is YOURS that is available NOW in your bank account. Using a debit card instead of a credit card. Isn't that the definition of "disciplined decisions"?
But yes, consumers do have the option to switch banks if they don't like the service or fees charged by the one they have...
When I say "disciplined decisions" I mean in a broader sense than just having money to back up a purchase, although that is an important part of it. We all have to realize that as consumers we have a responsiblity to enter into relationships with businesses that are aligned with our own interests.
If a business (banks or other) strays from this, just complaining, but staying in the relationship is rewarding poor business practices or even corrupt business practices. When this happens it is just as much our fault as it is the business implementing the poor service or poor business policy.
It's become my belief that too many people fail to respond to both outrageous business practices and misguided government policy. The result over time is gigantic messes like the 2008 financial crisis.
I understand your point and I agree with you.
But it's not right that you need an advanced degree in finance to understand your credit card statement -- or your phone bill, for that matter.
You can't tell me that the credit card reform wasn't long overdue.
The problem is that for every action there is an (un)equal and opposite reaction. Congress passes a bill to protect consumers and banks just find creative new ways to collect their fees.
As long as it's all above board and explained (and I don't mean in 8pt type in mumbo gumbo language), it's all good.
One thing that I would like to see is more widespread consumer eduction on how personal finance works. I'd like to see that taught in schools, actually.
As to consumers having a responsibility to enter into relationships with businesses that are aligned with their own interests -- so basically, consumers should keep their money under their mattress, is that it?
No Mighty Mom, it means that you do business with who YOU trust to handle your business.
Just a comment about what you said above
"One thing that I would like to see is more widespread consumer eduction on how personal finance works. I'd like to see that taught in schools, actually.
As to consumers having a responsibility to enter into relationships with businesses that are aligned with their own interests -- so basically, consumers should keep their money under their mattress, is that it?"
I absolutely agree on the point about the need for better education in the area of personal finance. The ironic thing however is that people probably would keep more of their savings outside of banks IF THEY WERE BETTER EDUCATED ON ECONOMICS RELATING TO PERSONAL FINANCE. It wouldn't all be in cash (paper money), but it would be in precious metals (gold & silver). While some may laugh at this idea, a better education on economics and personal finance would lead one to understand that money in the bank is a depreciating asset due to the inflationary policies of government. This is more true than ever. So don't totally dismiss the idea of holding savings outside of banks as unreasonable. Of course I would recommend finding a safer location than your mattress. It would also take power away from the big banks you are tirading (rightfully so to some degree) against, by shifting personal savings out of their coffers and closer to the savers own hands.
All very well in theory, Cags. That's as it should be.
But really, how many times are you supposed to switch cell phone carriers to find the one that's best aligned with your interests?...only to find out none of them is. They're only aligned with their own interests!!!
I did recently switch banks from a mega bank to a local bank. I'd been told this bank had great services andservice. It was a nightmare getting my account open and the guy who opened it neglected to tell me some key things that I ended up bumping into right away.
I can tell you categorically my city utilities department is not aligned with my interests. And they are the only provider of garbage and sewer services in town. I have even less choice with these services than with bank, credit card, mortgage company, cellphone and the like....
Are you listening to yourself? You are trapped in your own mind. You go with who treats you best. Hence, why competition solves any regulator issue, instead of government handling it for you.
Then I would take that up with the Branch Manager and so forth, until it is resolved.
Neither is mine. However, I don't have a choice, it is the only game in town.
Mighty Mom, I cannot change Cable companies, because Charter Communications has a contract to be the sole provider and no competition is allowed in town.
So, please. I do understand what you are saying. But, if you don't do what is best for yourself in most matters, where things are a luxury, such as cell phones, credit cards, mortgages and the alike, then you shouldn't complain. If you are living outside your means, then is it really being responsible?
I do not have a house phone. I don't have a car. I don't have a cell phone, and the only phone in my home is one my sister gave my mother for emergencies. I live in an apartment and not a house. I pay a huge rental expense, because the cost of real estate went up, bubbled and exploded, yet my rent hasn't come down?
No business or system is perfect, but in general the issues you are raising in your last to comments has to do with less choices or maybe no good choice that is aligned with your interests. I have a news flash for you.
More government = LESS CHOICE!
Take banking as an example. As government has gotten more involved with regulations and bailouts the number of small banks have declined and the big banks have gotten bigger. Many analysts are predicting that small banks (weak already due to the economy) will be hurt by the expensive and burdensome new regulations.
(I'm sorry to hear about your bad experience with a community bank. Personally though I'm pretty satisfied with my local credit union that store money at. Their not perfect, but I would take them any day over a big banks.)
Your point about city utilities is another excellent example of government power eroding individual consumer choices. Without city controlled monopolies their would in fact be more choices for you to pick from.
As for the cell-phone complaints, I'll admit I'm no expert in the telecommunications space, but I would be willing to bet that many of the sneaky fees and unwanted charges we all see on our bill are linked to government taxes and regulatory expenses that the cell-phone company is passing on to us.
As you mention for every action there is a reaction. This is very true and it's what I would refer to as unintended consequences.
More often than not, the unintended consequences (or maybe intended if your a lobbyist) is that consumers have less choices and more expenses!
Bottom line is that all entities are out for your dollar. Just as you are out to get a dollar from Google, etc.
If one realizes that and does a little research, you can find entities that will do you the least harm. It's not easy or fast, but if you want to keep from being reamed, it's necessary.
You'd be suprised how obliging a financial institution can be if you threaten to move your money and business.
Speaking of local banks, a friend of mine told me about how he went to open an account at a local bank and while he only deposited a few hundred dollars to start with, the clerk took him to the bank president who told him if he ever had any issues or needed anything, just come and see him! That bank has become very popular and successful because of that policy!
Interesting. I personally bank at a credit union and have not had any problems with limits at this point. I would carry cash and use checks rather than use credit cards. Boo hoo to the banks/credit card companies. They have had no problem taking money in interest from consumers who do not pay their full balance each month. Imagine what would happen if everyone used cash instead of credit cards if this were to happen. That sure would put a damper on their fat wallets.
Chase is upset that the US Gov has limited them to either 12 or 14 cents per transaction.So limit debits to $50 and have the customers make more transactions duh? The people of this country will continue to get ripped off until they pull all of their money out of the Too Big To Fails,period. I think I read somewhere that JPM chase is also testing a $5 ATM fee.When was the last time you saw a poor banker? Why is this country in a deep recession/depression? The banks.Join a credit union, use your small local bank or cash your check at Wal-mart for $3. How do you kill a parasite? STARVE IT
I have already been to a few restaurants that charge a fee for using a debit card. Also, I have been to a few stores that will not except a debit under a certain amount. It is almost better to have cash!
hmmm... very intriguing post. thanks for adding it. i believe that the vast majority of people will more than likely return to using their credit cards (which isn't good) and the smarter ones will start using cash (which i personally already do).
having cash in your hand makes you value it more - a dollar is a dollar, and it can go a loooong way if you use it wisely, look for coupons, sales, etc. it's about being smart nowadays, and if the banks are going to restrict your transaction limits you need to either become creative and use another method to get more cash, or decrease your costs and transaction amounts.
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