In an effort to reduce debt, many consumers may turn to using their debit cards more often than credit. However, banks say proposed changes to the fee structure for such transactions could end up costing consumers more money in the long run.
U.S. Sen. Dick Durbin of Illinois recently said that banks should be willing to accept a proposed change to the current debit transaction fee system because many institutions operate under a similar one in Canada with no problems, according to a report from the Financial Post. Canadian banks issue debit cards despite there being no transaction charge for using them at all.
However, banks say that 73 percent of all their interchange revenues come from debit purchases, and thus, the new restrictions would severely limit institutions' ability to turn a profit, particularly smaller banks that don't issue credit cards, the report said. As a consequence, many would likely increase fees elsewhere in their lending structure. Financial institutions warn that consumers could end up paying more than they currently do for bank services as a consequence.
Currently, the average debit card transaction fee stands at around 44 cents, but the proposed rule would limit that to just 12 cents.