JPMorgan Chase & Co. will phase out its debit rewards programs as it braces for changes as a result of pending Federal Reserve rules going into effect next year that will limit debit interchange, the company announced Nov. 4 at an analyst conference in Boston.
Chase last month stopped giving bonuses to bankers and branch managers for signing up new debit card customers. And beginning in February the bank will no longer issue debit rewards cards customers to new customers, Charlie Scharf, Chase’s CEO of retail financial services told analysts at the Bancanalysts Association of Boston Conference.
Analysts expect the Fed to issue the proposed new debit interchange rules next month, in accordance with the Durbin Amendment within last summer’s financial reform act. The legislation requires the Fed to create regulations that will set policy for establishing “reasonable and proportional” debit card interchange rates, effective in July 2011.
Scharf yesterday told analysts the legislation will likely result in “a transfer of value from lower mass-market consumers to merchants” and will force banks to increase account fees for most customers in order to compensate for operational costs that debit interchange fees help to offset.
Chase is also in the midst of developing several new checking account products it plans to introduce in February that will require customers to maintain a specific balance and have multiple accounts with the bank in order to avoid incurring fees, Scharf said.
Currently Chase charges no fees for checking accounts as long as customers initiate at least five debit transactions each month.
Chase offers several consumer and business debit rewards programs including three cards issued with cobranded partners. They include the Disney Rewards Visa Debit Card, introduced last year (
A Chase spokesperson tells PaymentsSource the bank will “eventually” phase out its existing debit rewards programs, but no timeframe has been determined yet.
Beginning in March of this year, Chase also changes its policies regarding the order in which it posts debit transactions. All transactions other than checks and ACH payments are paid in chronological order, based on the time stamp of the transaction, including ATM and debit withdrawals, Scharf said.
Transaction-posting order is at the center of a legal fight in which a federal court in August ordered Wells Fargo & Co. to repay $203 million in overdraft fees because of alleged manipulation of the order of customers’ payments, resulting in multiple overdraft payments in a single day (
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