Debit spending limits could spur credit card explosion, so apply now!
A bombshell CNNMoney.com report says JPMorgan Chase has a contingency plan under development for a $100 or even $50 spending limit on individual debit card transactions.
Why on earth would any bank deter debit card use? Simple. The Federal Reserve is drafting regulations to lower “swipe fees” (the cut of the transaction value that merchants have to pay every time a card is swiped), and the financial services industry is in panic as it sees a key source of revenue heading for the exit. Chase alone could see income from swipe fees drop $1 billion a year if the Fed moves forward.
Credit card use set for resurgence?
When Congress passed the Dodd-Frank Act, requiring the Fed to act on swipe fees (they’re also called “interchange fees”), it chose to regulate only debit cards. So now the banks are thinking of steering customers away from what’s about to become a low-profit product, and towards one that still attracts maximum swipe fees – credit cards.
Dedicated readers (Hi, Mom), may not be surprised to learn that around here that’s regarded as good news. Back in December, Index Credit Cards published a column (7 ways in which credit cards beat debit cards) that pointed out credit cards are better than debit cards. Of course, credit cards can be toxic for those who can’t manage them well, but they’re excellent for the self-disciplined consumer.
Credit card applications now?
If you’re about to increase credit card use, now would be an excellent time to make sure you have the right plastic in your wallet. And, if you find you haven’t the appropriate credit cards, don’t hesitate to make a credit card application right away.
When choosing a new card, you have to make a realistic appraisal of how you’re likely to use the product. Only then can you decide what’s most important. For example, if you pay down your balance in full every month, then ignore credit card rates; you’ll never pay interest anyway. If, on the other hand, you always or sometimes carry balances, then you need to explore low interest credit cards.
You also have to be realistic about your likelihood of qualifying for a particular card. Generally speaking, the very best deals are available only to those with stellar credit scores. But you may still get approved for a first-class mainstream card even if your credit score doesn’t currently make you vertiginous.
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