Raising the Limits

  An evolving payment landscape and increasing consumer expectation that merchants will accept PIN-debit cards for purchases is causing large debit card issuers to re-evaluate their withdrawal restrictions. Issuers are changing policies on how much cash cardholders may access at ATMs or spend each day using PINs at the point of sale.
  Chicago-based Harris Bank, for example, more than doubled its PIN-debit purchase limit last year, to $2,500 from $1,000 per account. Eileen Zitnan, Harris vice president of credit card limits, says one of the most frequent telephone requests to the bank from customers last year was to increase ATM withdrawal and PIN-debit purchase limits.
  The bank wanted to reduce such calls, so it raised the PIN-debit limits for all customers instead of accommodating individual cardholder requests. "After we raised the limits, we noticed the number of phone calls went down from consumers requesting higher limits," Zitnan says. She says the higher limits have not raised any risk.
  Consumers, it seems, would use their PIN-debit cards more often, and for higher-value purchases, if financial institutions increased their limits and made their limit policies clearer, suggest the results of a recent survey by the Star electronic funds transfer network. The survey found that consumers perceive that their preferred daily spending limits on purchases exceed the actual limits set by their financial institutions.
  When cardholders were asked their preferred daily PIN-debit spending limit, 33% preferred there be no spending limit. Consumers, noting support for a spending limit, generally preferred the limit to be $500, or $100 more than the median limit of $400 now set by issuers.
  About 30% of respondents reported that their financial institutions did not have a daily spending limit for PIN-debit, though most financial institutions do. Regarding ATM withdrawal limits, 13% said their financial institutions do not have a daily withdrawal limit.
  When asked about their preferred daily withdrawal limit, 18% of cardholders indicated that they would prefer no withdrawal limit. Consumers reported a median actual withdrawal limit of $300, though they generally said they would prefer a $400 limit.
  Gary Jewell, senior vice president of Carrollton Bank in Baltimore, is not surprised consumers are unable to quote exact limits. "We do not really market our limits," he says. "Though we disclose our limits to customers, most of them tend to figure it out based on their card usage."
  Also, many financial institutions are becoming more customer-friendly in setting debit-limit policies, adds Bruce Hobbs, electronic commerce manager for Cincinnati-based Fifth Third Bank. Many issuers, for example, now increase daily limits around holidays such as Christmas, Hobbs notes. "It's an attempt to accommodate the consumer," he says, adding that issuers rarely promote the increased limits to customers.
  Kirk Ergang, Star senior vice president of network administration, says financial institutions typically do not advertise limits because they know consumers do not want to feel they are being denied access to their money. Limits on debit card use, which typically are set on a 24-hour cycle, are set to mitigate risk, he says.
  Consumer demands for more convenient use of PIN-debit functions are driving the changes in limit policies, says Ergang. "Over time, networks and [financial institutions] expanded PIN into greater retail use, and limits have increased because of its acceptance in big box stores, where people are spending more," he says.
  Most banks say they typically honor individual requests for limit increases based on the customer's account type, average balance and other factors.
  Years ago banks were forced to set once-size-fits-all limits on POS and ATM transactions because transaction-authorization software could not easily individualize limit policies. But more-advanced authorization software has changed that practice.
  Third-party transaction processors and banks that process their own transactions now can even set different limits for ATM and POS use, industry observers says. "The banks have much more flexibility in regards to how they want to set their limits, and that goes for separating POS from ATM limits," says Steve Rathgaber, president of the NYCE EFT network.
  Some banks are factoring in potential surcharges on foreign ATM use. "That is why we set our daily ATM limit at $510, so that customers can get the full value out of the machine," Hobbs says. Fifth Third's daily PIN-debit purchase limit is $2,000.
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