June 18, 2010
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Financial Reform; What's In It For You, Pt.3
More limitations could mean more debit card rewards.Consumers might find that with the limitations placed on the use of debit and credit card transactions, they'll experience a sharp decline in the receipt of rewards. Some students may depend on credit card reward miles for passage home during holidays. Many of the premium cards that reward cardholders with greater rewards cost the merchant or organization accepting the card payment higher transaction fees. The alternative may be that colleges, universities and government agencies may place limitations on where and what expenses can be paid for by debit or credit card. For example; colleges and universities may decide to accept card payment in the bookstore, but not for tuition. Whatever path these organizations take, changes will be in the making especially since this law will eradicate any existing contract between the lender and the university that limits such activities.
On a more positive note, if financial reform legislation is passed with the current provisions, cardholders may begin to realize more discounts if they use debit card over credit card payment. In addition to having the authority to set minimums and maximums, merchants will also be able to offer consumers a discount if they choose to pay by debit card rather than a credit card. With this provision, debit cardholders may also begin to see greater rewards since banks will be motivated to capture a large share of the debit card market. Anticipation of increased competition in the debit card market and in view of the historical abusive practices over recent decade prompted the Fed to include provisions for the Federal Reserve to regulate interchange fees.
The banking industry has its own concerns as well about the new financial reform legislation. Although many banks believe the requirements for more clarity and transparency in debit and credit card contracts are warranted, if the bill caps interchange fees, consumers will eventually pay the price as other fees for services increase. Opponents of the bill say what the Fed is really trying to do, is "legislate integrity"; but according to an Armstrong Wealth Management Financial Advisor, Doug Armstrong, "that's really what you need in life."