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Calling a Spade, a Spade

Mercator Advisory Group by Mercator Advisory Group
March 22, 2011
in Analysts Coverage
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Businessman pressing a Change concept button.

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It seems to be official – Chase has begun sending letters out to cardholders that they will be ending their debit rewards program in July of this year. Other issuers are more quietly making these changes, such as Regions Bank, who is closing their points program to new cardholders, but keeping their merchant cashback program going. What’s different about Chase is that they are tying their decision directly to the Durbin Amendment.

“A Chase spokesman, Tom Kelly, declined comment, but provided a sample of a letter that was sent to customers. “Congress recently enacted a new law known as the Durbin Amendment that significantly impacts debit cards,” it read. “As a result of this law, we will be changing our debit rewards program.”

Customers who have already accumulated rewards will still be able to use them after July 19, and the bank won’t charge an annual fee any more.”

Of course, Chase is taking a calculated risk that there won’t be a delay in the Durbin Amendment implementation, as per the two recent bills introduced in Congress are asking for. One might interpret this as an indication of their opinion on the likelihood of that delay. Regardless, the fact is that rewards programs are underwritten with interchange fees and once that income base is gone, traditional programs are unsustainable.

Click here to read more.

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