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Home Banking News Debit Rewards Card Programs Becoming Extinct

Debit Rewards Card Programs Becoming Extinct

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JP Morgan Chase, Wells Fargo and SunTrust have all made the decision to eliminate rewards card programs. Customers received letters notifying them of the change. Banks argue that the new restrictions on "swipe fees" are forcing them to dismantle rewards programs. SunTrust's brief letter explained to customers that the bank was forced to end client rewards due to the financial impact of new federal regulations, though swipe fees weren't specifically mentioned. The banking industry also maintains the new federal regulations on swipe fees are what prompted the hike in ATM fees, up to $5 in some areas. 


What Are "Swipe Fees"?

Every time you swipe a debit or check card to make a purchase, the merchant pays the bank a portion of the sale as a "swipe fee". Fees vary based on the amount of the transaction, type of purchase, etc, but usually translate to 1% or so of the purchase price. Currently, these fees average about 44 cents a transaction, according to All told, it adds up to about 16 billion dollars in bank revenue a year, with merchants footing the bill.

Merchants, in turn, generally hike prices on products to cover the fees. So each time you make a purchase, there's a small upcharge included to cover the merchant's swipe fees. Ultimately, the cost is passed along and consumers end up footing the fee.


Banks Blame Federal Regulations

A new regulation would limit "swipe fees" to 12 cents a transaction, which has the banking industry up in arms. In response, many larger banks, including JP Morgan Chase, Wells Fargo and regional bank SunTrust, decided to hike fees and end small incentives like debit card rewards. Several banks expressed interest in placing a mandatory $50 cap on all debit card transactions.


Debit Rewards Card Can Provide A Nice Perk To Customers

The debit rewards card among one of the basic bank loyalty programs, providing clients with an extra incentive to stay. Similar to earning frequent flier miles, customers earn points when making purchases via a bank debit card. Rack up enough points, and the bank allows you to redeem them for gift cards, airline miles and even cash in some cases. Banks design these programs as small tokens of appreciation to customers, to increase retention and boost overall account balances.


Cancellations May Backfire

The banking industry may feel cancelling rewards and hiking fees is a just response to fee regulations. Unfortunately, this method of thinking only makes clients suffer as they're caught between the crossfire of bank executives and regulators. The cancellation of a rewards card program probably won't be a deal breaker for the majority of account holders. However, most people prefer banks that cause the least amount of hassle, and with the rise of online banks and credit unions, there are a lot more choices out there. 

By Erin ONeil /


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