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Credit & Debt

Debit-Card Rewards Disappearing

How consumers should respond when their bank eliminates perks.

By now you might have heard the news that JPMorgan Chase will stop offering debit-card rewards for most of its customers July 19. Chase isn't the first bank to make this move (PNC Bank and U.S. Bancorp beat it to the punch), and it likely won't be the last. "I think there will be others to follow," says Bill Hardekopf, CEO of LowCards.com and author of The Credit Card Guidebook.

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The elimination of debit-rewards programs is a preemptive strike by these banks to compensate for the potential loss of revenue from debit fees. Banks have used debit rewards programs to entice customers to use their cards, which generate revenue for banks every time cardholders swipe them. Merchants pay banks an interchange fee of 1% to 2% of the purchase price for each debit transaction. But the Federal Reserve has proposed capping that fee at 12 cents a transaction. It has until April 21 to rule on the proposal before enacting it July 21.

Debit-card rewards usually aren't as generous as credit-card rewards. But if that's what drew you to Chase, U.S. Bancorp or PNC (which had one of the best debit-rewards programs), you might want to consider shopping around for another account with perks. But Hardekopf suggests waiting until after the Fed's April 21 deadline to see what cap it decides to enact and to see how banks react.

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On the bright side, lower debit fees may mean merchants will start offering discounts to customers who use debit cards.

But what about those proposals by Chase and Bank of America to cap debit purchases at $50 to $100? Hardekopf says it's likely just a political move to get the Fed to make the cap on interchange fees higher than the proposed 12 cents. He doesn't expect limits on debit purchases to become a reality.

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