Say Goodbye to Debit Cards

Originally Published on March 11, 2011.

We’ve been saying it since December 2010, that Debit cards will cease to exist when the new Wall Street reform laws go into effect. On February 18th, we argued that the cost of a debit card transaction would shift from the retailer to the customer. You can view that article here: Debit Card Costs May Be Put on The Consumer – Don’t Make us Pay!.

We were right on the mark. Today JPMorgan Chase announced that debit card carrying customers would soon be subject to a purchase cap of $50 – $100 per transaction. As a result, a huge chunk of the U.S. population would no longer be able to make an average size purchae. The new video game system? Too big. A computer? Too much money. A bar tab? Better bring cash…

The reason for such a dramatic change was provoked by Debit card reform. In July 2011, the Federal Reserve will begin enforcing a maximum debit card transaction cost of 12 cents. For card issuing banks, payment networks, acquirers, and ISOs, this 12 cents is too low to be profitable, let alone sustainable. As a result, banks must make up for the loss by charging consumers.

For more information, check out the CNN article.

- The Merchant Processing Resource

http://www.merchantprocessingresource.com

Sean is the founder of Merchant Processing Resource, the co-founder of the Merchant Cash Advance forum, DailyFunder.com, the developer of the first Merchant Cash Advance industry iPhone app, and a moderator of both the Small Business and Entrepreneur communities on Google+. Learn more about his Merchant Cash Advance background on LinkedIn or follow him on Google+.

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