JPMorgan Chase (JPM),(BAC),(WFC) May Cap Debit Cards

In what could result in an extraordinary negative impact on numerous businesses and consumers, banks like JPMorgan (NYSE:JPM), Bank of America (BAC) and Wells Fargo (NYSE:WFC) may end up having to cap the amounts their customers can use when swiping their debit card, with some numbers being thrown around being from $50 to $100.

Citigroup (NYSE:C) said at this time they have no plans to make any changes to their debit card policies.

This has nothing to do with whether you run your card as credit or not, as it's connected to interchange fees.

How it works is if swipe your debit card your bank charges the retailer an average fee of 44 cents, which it then shares with its partners. Those fees add up to about $16 billion a year, according to 2009 data from the Federal Reserve.

The fees are mostly in place in order to protect against fraud. The new banking regulations would cap the fees at 12 cents per transaction, significantly cutting back on the ability of banks to protect themselves; the reason for the proposed cap on debit card amounts able to be spent.

One immediate negative outcome would be for Internet businesses selling things online. Millions of people use debit cards as the means of transaction, and to limit usage at levels being put forth could be devastating to those millions of businesses.

Think of having a $50 to $100 limit when making purchases from Amazon.com (NASDAQ:AMZN) as one example of the potential fallout from the debacle.