The debit card may become a thing of the past if banks begin charging additional fees once the Federal Reserve places a cap on interchange fees. In a recent survey by Total System Service Inc. and the Mercator Advisory Group, 49% of debit cardholders said they would stop using their cards or use them less if banks began charging a $1 to $2 monthly fee for their use. The survey also revealed that 25% of high-volume debit card users would close their accounts altogether.
The survey collected the reactions of consumers, just days prior to the Federal Reserve’s meeting to finalize the implementation strategy of the Durbin Amendment. The agreement amends the Dodd-Frank Act, which introduced the concept of greater limits on interchange fees. Set to go into effect on July 21, the law places the capthat banks can charge merchants for debit card transactions at 12 cents, down from the prior cap of 44 cents.
The majority of the survey respondents were considered to be heavy debit card users. Of the heavy users, 61% say they will stop using their debit cards altogether or will only use the cards for transactions that are $50 or more. Others say that their reactions will depend on what exactly the issuing bank implements in response to the law. For example, if the bank limits the number of transactions on a monthly basis, 55% would stop using their debit cards or use them less. About 16% would close their bank accounts under these conditions.
Of the survey respondents, 48% say they use their debit cards a minimum of 10 times per month. Only3% of respondents say they do not use their debit cards at all. More than halfof respondents were debit cardholders from large national banks, which are the financial institutions that will feel the biggest effects from the Durbin Amendment.