Is the debit card being pushed towards an early grave?

Could debit cards become a thing of the past sooner than you think?

In a victory for retailers but headache for banks, a federal court ruled this week that U.S. banks must further reduce interchange fees -- "swipe fees" -- that merchants must pay for processing transactions.

Swipe fees are currently capped at 21 cents per transaction, a reduction made in 2010 from 44 cents. However, U.S. District Court Judge Richard Leon has scrapped this rate, paving the way for even lower charges in the future.

While this hidden fee is the result of the relationship between traders and banks, consumers could be left picking up the bill, which may equate to billions of dollars in lost revenue.

The connection? Analysts argue that as banks count the pennies, offering few free accounts, scrapping loyalty schemes and removing free overdrafts, the $250 annual maintenance requirement for checking accounts could make the entire debt card business financially unviable.

If the judge's ruling goes ahead, the missing retailer revenue has to be replaced -- whether through the closure of checking accounts, killing the debit card industry -- or perhaps by enticing consumers to use different methods that banks can capitalize on. Failing that, we may simply be hit with the imposition of higher overdraft and account maintenance fees.

Although we're used to reaching for our card at the cash register, if the product becomes a loss-maker for banks, will we have to rely on other methods in the future?

Via: Market Watch

Image credit: Flickr

This post was originally published on Smartplanet.com