Americans May Turn Away from Debit Cards

Many major lenders are now testing plans that will charge consumers a monthly fee for maintaining an account with an associated debit card, and customers say that this will make them reconsider their payment methods, according to a report based on a poll by the Associated Press and GfK Custom Research. Currently, nearly 67 percent of consumers use debit more often than credit, but if they were to be charged a $3 monthly fee, 61 percent would switch. That number rises to 66 percent for a $5 fee, and 81 percent for a $7 monthly charge.

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The change on the part of banks is largely coming due to greater federal regulation that will severely limit the revenues they enjoy as a result of interchange fees on debit purchases, the report said. Beginning on October 21, they will only be able to charge 21 cents for every debit transaction they process, down from the current average of 44 cents. Banks expect to lose billions annually as a result.

Originally, however, the Federal Reserve Board wanted to limit the amount banks could charge for debit purchases to just 12 cents – a drop of about 70 percent – but lobbying efforts by the banking industry won out and a middle ground was reached.

Image: Neil T, via Flickr.com