Chase Takes the Ax to Debit Rewards — Again

Customer at a Chase BankWell, that didn't take long. A little more than a month after we told you how Chase had suspended new customer enrollment into its debit rewards program, the mega bank has announced that it's eliminating reward-earning entirely. According to this article, Chase mailed letters saying it would discontinue rewards in July, blaming the Federal Reserve's limitations on interchange fees.

The New York Times quotes this segment of the letter sent to Chase customers: "Congress recently enacted a new law known as the Durbin Amendment that significantly impacts debit cards...As a result of this law, we will be changing our debit rewards program."
One important point to note: Those limitations haven't been decided on, and it's not at all certain that the Fed's initial suggestion of a 12-cent-per-transaction cap will ever make it into law, so Chase is jumping the gun a bit here. What's more, even if the 12-cent guideline becomes law, it won't take effect until the summer, anyway. This makes consumer advocates suspicious, leading some to speculate that the bank is using the threat of cutting off debit rewards to try and generate public backlash against the proposed fee limits.

"Cash customers at the store pay for credit and debit card rewards," says Ed Mierzwinski, consumer program director for advocacy group US-PIRG. Mierzwinski echoes a long-term complaint of the retail industry, which asserts that high interchange fees force them to raise prices on goods for all customers, including those who pay with cash. Mierzwinski predicts other banks might follow Chase's lead. "With banks looking at lower interchange revenue, rewards programs for bank customers will decline," he says.

Changing banks is a pretty big hassle (much more so than just using a different credit card), so if you're contemplating making a switch because of a debit rewards program, make sure you'd like the bank's other offerings and services before you make the jump.

Mierzwinski brings up another good point: If you have a cache of accrued rewards points, it's a good idea to cash them in regularly for whatever reward will give you the highest redemption value. "Since banks can change rewards programs at any time, consumers should consider using or transferring rewards that may be at risk of cancellation or expiration, unless they have a firm promise from the bank that cannot be broken," he advises. As for Chase customers, the bank says they will be able to access and use their rewards after the program ceases; however, customers who are just a few points shy of cashing out may be out of luck.
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