U.S. Banks Debate Letting Debit Cards Bounce

By PYMNTS | March 7, 2011

Many major U.S. banks are weighing whether to allow debit cards to bounce like checks, according to the Wall Street Journal.

In December, the Federal Reserve proposed capping debit card interchange fees at 12 cents for both signature and PIN. (More details)

“To make back some of that money, banks are weighing whether to divide debit-card services into components and charging for them separately-known as ‘unbundling,’” explains the Wall Street Journal’s Aparajita Saha-Bubna. “For example, if merchants want a guarantee of payment, as approved debit transactions currently offer, that would cost extra.”

Unbundling could be a setback for merchants, who pay for debit transaction fees. It is unknown at this time if banks are considering imposing a monetary fine for consumers should a debit transaction bounce, like with a returned check.

Recently, the New York Post reported that Bank of America, Citigroup and JPMorgan Chase were mulling over whether to limit the amount consumers can charge on their debit cards in light of the new regulations. (Related Article: Will Durbin Cause Banks to Cap Debit Card Purchases? )

U.S. consumers spent $1.39 trillion last year using debit cards branded with Visa or MasterCard, a 15 percent increase from 2009, according to the Nilson Report.

Click here to read more about changes banks are considering in light of the Fed’s debit interchange proposal.