hand with credit card - Chase rewardsBack in December, we told you how the Federal Reserve paved the way for sweeping changes -- and likely reductions -- to the fees merchants pay banks for the privilege of accepting your debit card when you make a purchase. Exactly how much money banks stand to lose from this is an open question, especially because the Fed won't issue its final ruling until July, but that hasn't stopped one bank from dialing back its debit rewards program.Starting next week, Chase announced that it would stop enrolling new customers in its debit rewards program (current program members get to keep their status, at least for now). According to this article, Chase blames the new regulations -- even though they haven't gone into effect yet. As the piece linked above points out, Chase customers weren't exactly getting rich off their debit rewards; a basic checking account customer would have to buy $25,000 worth of stuff with their debit card in order to earn a $50 Macy's gift card. Customers who want to earn rewards at a faster clip have to pony up a $25 annual fee.

Although it's a little disingenuous that one of the biggest banks in the country is crying poor over fee reductions that won't even kick in for almost six months, one consumer advocate says he'd be happy to see debit reward programs fade into history.

"Most consumers will be better off," asserts Ed Mierzwinski, consumer program director at watchdog group U.S. PIRG. Here's why: When banks charge your local grocery store to run the debit card of the guy on line in front of you, the store responds by passing that charge along to all its customers in the form of higher prices. "The whole purpose of debit and credit rewards is not because the bank wants to be your friend," he says.

Mierzwinski is confident that these forthcoming limits on fees will give this nation's retailers more wiggle room to compete for business through aggressive pricing -- in other words, your trip to the store could be cheaper.

But don't expect the banks to go around trumpeting that advantage, Mierzwinski tells WalletPop. "The banks are trying to sell this story that merchants will keep the money, but I don't buy it," he says.

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