Banks push for credit over debit card use
When the Dodd-Frank financial reform act went into effect last year, U.S. banks were forced to reduce the amount of money they collected from each debit card transaction made by users. This led banks to change the monthly fees in order to make up for the billions of dollars lost, according to the Minneapolis Star-Tribune.
The changes were made to reduce the growth of debit card use, which has been surging for the past couple of years, and increase the use of credit cards. However, it may also lead to consumers switching to smaller banks that can avoid the hefty losses that larger banks will inevitably feel, the news source reported.
Banks are now forced to cap the amount taken from transactions from the plastic cards at 21 cents, as opposed to their traditional 41 cent limit. This led banks to make their own decisions to push consumers toward credit cards. For example, Wells Fargo & Co. is going to charge its cardholders in an additional $3 per month if they use their debit cards during an experimental program in certain areas, the Tribune asserted.
According to CreditDonkey, debit cards are used most often for purchases between $20 and $100. However, if banks add fees that consumers need to pay when they use their card, there may be a role-reversal in card-type usage.
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