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Banks Mull $50 Debit Card Spending Cap

It could become more difficult to use your debit card on shopping trips.

Chase is mulling a $50 to $100 limit on debit card purchases.

The New York-based bank, which holds 17 percent of deposits in the Chicago area, and some other big lenders have begun instituting new fees and restrictions on checking and savings accounts.

The moves come in response to a federal crackdown on certain practices. One rule that could go into effect in July is a reduction in the charge that merchants pay to card issuers when customers make purchases with debit cards.

Debit card use nationwide exceeds other forms of noncash payments, according to a 2010 Federal Reserve payments study. By the number of payments, debit cards represent about 35 percent of total noncash transactions.

The Fed has proposed a rule that would cap what are called "debit card interchange fees" at 12 cents a transaction, a reduction of about 70 percent from the average cost in 2009.

That change would take a bite of $1.3 billion annually from Chase's fees, which also help cover losses from fraudulent transactions. If banks' ability to recoup losses on, say, a $400 purchase is limited to 12 cents, then they're more likely to consider capping purchases made with debit cards.

"The proposed rules give banks little incentive to authorize large debit transactions that will bring additional fraud risk but no additional revenue," Greg McBride, senior analyst at Bankrate.com, told the Tribune Thursday. "New rules on debit card swipe fees have the unintended consequence of making debit cards a more expensive or less applicable method of payment for many consumers."

People who have sworn off credit, or can't get credit, will resort to cash or checks if paying with debit cards isn't an option, he said.

"Consumers with credit cards may find themselves back into the habit of relying on them for larger purchases, resulting in more debt," McBride said.

The Fed's proposal would carry out the debit card interchange fee provisions of the Dodd-Frank Wall Street Reform & Consumer Protection Act. Public comments on the Fed's proposal were due last month and could take effect this year.

Bank of America, Chicago's second-biggest bank, said it has "some concerns, specifically related to the Durbin amendment," named for Illinois Sen. Dick Durbin, in the Dodd-Frank Act. It's Durbin's amendment that would require that debit swipe fees "be reasonable and proportional." His office declined to comment on Chase's possible move.

If the final rules that are issued are changed little, "there's no question that it will impact how we and other issuers price deposit and payment services, and what features and benefits are included," a spokeswoman for BofA, which holds 11 percent of Chicago-area deposits, told the Tribune Thursday.

The New York Post reported the possible changes last month.

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