Debit-card rewards: beginning of the end?

Debit-card rewards are being trimmed as banks contemplate loss of revenue from new federal legislation. Will debit-card rewards disappear completely?

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    In this Nov. 2, 2009, file photo, a customer swipes a MasterCard debit card through a machine while checking out at a shop in Seattle. Because of stricter regulation, some banks are trimming or eliminating their debit-card rewards.
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If you are a Chase debit cardholder, you probably just received some bad news in the mail.

Beginning July 19, you will no longer earn rewards on your debit card.

Chase debit card customers will be allowed to keep the points accumulated by the July 19 cutoff – they will not expire.

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Wells Fargo is also cutting its debit card rewards program for new customers, although there are no changes to the program for existing customers.

The banks say this is due to the Durbin Amendment in the financial overhaul bill which caps the interchange fees banks can collect from merchants to 12 cents per transaction. Debit card interchange, or "swipe," fees average a little over 1% of a transaction. The banking industry claims it will lose billions of dollars if the Durbin Amendment goes into effect.

A ruling on the Amendment will come from the Federal Reserve by April 21 and the law is projected to take effect three months later.

The debit program at Chase gave 1 point for every $5 purchased with a debit card. Additional points could be earned with each purchase if the customer paid an annual fee.

Banks have lost significant revenue in the past two years, and the proposed cut in the interchange fees on debit cards would be another major setback for banks. When revenue dries up in one area, banks find another way to make up for lost revenue, and it will usually be at the expense of the consumer.


Chase is not the first bank to cut some benefits from their debit card rewards program. U.S. Bancorp and PNC Bank had previously made cuts. However, Chase is the largest bank to cut debit rewards and other banks will likely follow if the current cap on interchange fees is approved.

But don't be surprised if a competitor tries to capture some of Chase's customers by promoting the fact that they still offer rewards on debit purchases.

Bill Hardekopf is founder of Lowcards.com, a credit-card information site.

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