The End May Be Near for Debit Cards

The recent decision by U.S. District Court Judge Richard Leon to reject the Federal Reserve’s 21-cent limit on debit card interchange fees instituted by the Dodd-Frank law opens the door for even lower limits on interchange fees, and possibly the end of the debit card payment model altogether. Banking industry experts note that the number of banks offering free checking declined and the average overdraft penalty rose after the passage of Dodd-Frank. If the limit on interchange fees is lowered even further, it might lead to even higher overdraft fees and an increase in checking account maintenance fees. The American Bankers Association’s Nessa Feddis says checking accounts will likely be where many banks turn to make up lost revenue, eliminating free checking, raising account fees, and requiring a higher minimum balance. Banks also might try to steer consumers to other payment options, such as credit and prepaid cards, not subject to fee limits. “It really could mean that the debit-card business is much less viable,” says consultant Sherief Meleis.

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From “Is This the End of the Debit Card?”
MarketWatch (08/01/13) Passy, Charles