JPMorgan Chase, one of the nation’s largest banks, is considering capping debit card transactions at either $50 or $100, according to a source with knowledge of the proposal. And the cap would apply even if you run your debit card as credit. The reason for this is interchange fees. as part of the Wall Street reform legislation that was passed last year, these fees are being slashed. As part of the Wall Street reform legislation that was passed last year, these fees are being slashed from $0.44 to about $0.12 per transaction. Banks say that they need this additional revenue to offset money lost from fraudulent transactions and without it, they will have to limit their losses with these caps.
1. Based on this video and article, who will be most affected if the banks set these limits? Would this change affect you?
2. What is the name of the Wall Street reform legislation?
3.Â From the accounting point of view, is there a difference in how a merchant records a debit card purchase as compared to a credit card purchase? Explain the journal entry or entries.
Ellis, B. (2011) Debit Cards: $50 spending limit coming? CNN.com, March 10 (Retrievable online at http://money.cnn.com/2011/03/10/pf/debit_cards_limit/index.htm?hpt=T2)
CNN video. (2011). Rumored Debit Card Limit, March 10.