Even a small fee on debit cards will lead consumers to abandon them in favor of other payment methods, including cash, checks and even credit cards, according to a recent survey.
Debit card issuers with more than $10 million in assets have been discussing adding fees or otherwise limiting debit card use in the wake of regulations that promise to significantly reduce debit card interchange.
The poll, commissioned by the Associated Press and conducted by GfK Roper Public Affairs, found that 68% of consumers have debit cards and use them to make purchases more often than credit cards. But the survey also found that 61% of consumers said they would switch to another form of payment if their financial institution charged as little as $3 per month for the use of the debit card. The numbers go up to 66% if the fee is increased to $5 per month and to 81% when the proposed fee moved to $7 per month.
And where do the surveyed consumers say they will take their previous debit transactions? Back to cash and checks.
According to the survey, 80% of consumers said they would be either somewhat likely (27%), very likely (25%) extremely likely (28%) to move back to cash and 66% reported being somewhat likely (24%), very likely (19%) or extremely likely (23%) to move back to checks.
Ironically for merchants, 40% of consumers said they were either somewhat likely (19%) very likely (10%) or extremely likely (11%) to use credit cards instead. Credit cards carry a significantly higher interchange rate charged to merchants.