NEW YORK — It could be the beginning of the end for debit card rewards.
The rewards programs for debit cards typically aren’t as rich or as popular as those linked to credit cards, and now there’s reason to believe they never will be. As of Feb. 8, Chase says it will close off enrollment for its debit rewards. The program will only continue for those who are already enrolled as of that date.
Chase says the decision is the result of new regulations that limit how much banks can earn from checking accounts.
Banks collect fees from merchants whenever customers use their debit cards to pay for purchases. The fees are a set portion of the purchase amount, typically about 1 percent.
As part of the sweeping financial overhaul last year, however, the Federal Reserve has proposed a cap that could slash the billions of dollars in fee income for banks by up to 70 percent. The Fed is still accepting comments, but a cap on the fees is expected to go into effect by this summer.
Analysts say the reduced profits will prompt banks to end or curb their debit rewards programs. Now Chase is doing just that. Bank of America, Citi, and Wells Fargo say they haven’t yet decided on any changes to their programs.