Banks are hoping to route more revenue into their stockings this holiday shopping season by encouraging consumers to pull out their credit card to pay for purchases rather than their debit card.
In response to the Durbin Amendment, which went into effect on October 1, that capped the interchange fee amount banks are able to collect from merchants per debit card transaction, banks have been scrambling to finds ways to recoup some of the $8 billion they have estimated they will lose annually as a result of the new fee structure. In the effort to incentivize consumers to choose credit over debit as a payment option, most banks have all but eliminated any reward programs that were attached to debit cards use. Some banks, such as Wells Fargo and Bank of America, even announced plans to charge customers a monthly fee for using their debit card for anything other than ATM activity but those plans were abandoned in the face of widespread consumer outrage.
Now banks are employing different tactics – instead of “penalizing” consumers for using their debit cards, they are trying to make the use of credit cards substantially more attractive. This is evident in the flurry of attractive promotional offers that come with opening up a new credit card account that have been sent out by mail to consumers.
Notably, banks are also really ramping up the rewards programs on the credit cards for the 2011 holiday shopping season.
“There is some kind of reward out there for everybody. It`s a matter of selecting one that`s of most value to you as an individual,” said Ken Paterson, the director of the Credit Advisory Service at Mercator Advisory Group according to Fox Business.
Cash back rewards are the most prevalent, with some issuers offering as much as 5% back on qualifying purchases such as on items bought through their particular online shopping portal. Big banks Citibank and Chase have both opted to extend generous cash back deals towards new cardholders in the form of $200 back if they make $500 worth of charged within a specified period of time.
For responsible users of credit, this holiday season is a time to really rake in the rewards.