DEBIT CARDS TO BE LIMITED

DEBIT CARDS TO BE LIMITED

Your debit card may soon be denied for purchases larger than $100 -- or even as little as $50.

JPMorgan Chase, one of the nation's largest banks, is considering capping debit card transactions at either $50 or $100, according to a source with knowledge of the proposal. The restriction would apply even if you run your debit card as credit.

Why?  Because of something called interchange fees.

Right now, every time you use your debit card your bank charges the store an average fee of 44 cents, which it shares with its partners. Those little fees, however, add up to about $16 billion per year, according to 2009 data from the Federal Reserve.

But legislation passed last year that these fees would be slashed. The Fed (also known as the Federal Reserve System) is currently proposing rules that would go into effect in July 2011 that would cap interchange fees at 12 cents.

That's a big enough cut to cost Chase more than $1 billion a year. And Chase is not be alone. Other major debit card issuers are also projecting huge losses from the interchange fee cap.

Joe Price, president of consumer banking for Bank of America said in an e-mailed statement that the lower fee wouldn't fairly compensate the bank for the infrastructure and services it provides to retailers.

As a result of the lower interchange fees, the maximum the card companies would allow to be charged could be capped at $50 to $100.

And consumers would end up feeling the pain when Bank of America is forced to recoup costs "by increasing the cost of their everyday debit card transactions, limiting their payment choices, and impacting industry innovation," according to the email.