Wondering Why Your Bank No Longer Offers Debit And Credit Cards With Rewards?
Banks used to offer various rewards with their debit cards, most people liked that they got these extras. Unfortunately this is a thing of the past and most people do not know why. It has to do with the fees and the struggle between the banks and the retailers who accept those cards. Still don’t understand? Here is what is going on.
Visa and Mastercard are just a couple examples of big processing networks that the retailers have to pay fees to in order for their customers to be able to use their credit and debit cards at their stores. Retailers want the fees to be lowered. They feel that the fees are too high and that in the end the customer has to pay more for their product to make up for the retailer having to pay for these fees. The processing networks did not want to lower the fees.
It is these fees along with overdraft fees that support most of the rewards that banks offer with debit cards and credit cards. Without these fees banks do not have as much funding for these reward programs. Overdraft fees do bring in plenty of money every year for banks but it is not enough to fully fund the reward programs for their credit and debit cards without the fees they get from retailers for running the cards.
Then the government started working on financial reform. Once the retailers got wind of this they charged Washington in hopes of getting some changes made when it comes to the fees. They did have success at this. Sir Dick Durbin is a senator from Illinois, and he is considered to be a friend to the poor. He helped pass the Durbin Amendment.
What the Durbin Amendment does is cap the interchange fees that are charged when to the retail store when you use your debit or bank credit card at the store. This made the retail stores very happy because they do not have to pay as much in fees. However, the banks are not as happy because they are not earning as much in fees as they otherwise would be.
Loosing this income is the main reason that banks are not offering all the rewards and extras that they used to offer on their credit cards and debit cards. Now the consumer loses out on benefits because the retail industry wanted to regulate the fees they paid, while claiming it was in the consumers’ best interest so they do not have to pay more for their products. This leave many wondering which is better paying a little extra over the course of the year for products to get rewards on bank issued credit and debit cards or to not have to pay more throughout the year for the same products but getting no rewards on the same credit or debit card.