The end of Debit cards?

Here is a very easy prediction: there are going to be fewer debit cards, possibly a lot fewer cards. There seems to be so many substitutes. Not only do debit cards compete against each other, but credit cards are a substitute. There is also potential entry into the market. Discover (assuming that they don't already offer a debit card) could start to offer one. Other companies could directly offer a credit card themselves. Kmart and Kohl's have their own credit card and just like Sears went from having a Sears Card to Discover, they could do the same thing if there were all these extra profits to be had.

The new restrictions, most of which won't be made final until April 21, aim to cap the amount of money that debit-card issuers can charge merchants for so-called swipe fees. Banks would face a seven-to-12-cent-per-transaction cap on the interchange fees under either of the two proposals unveiled Thursday. That represents as much as an 84% drop from the current average of 44 cents. Analysts had been expecting a drop of up to 60%.

"Nobody expected it to be this draconian," said David Robertson, publisher of credit-card industry newsletter the Nilson Report. One bank executive said the cut was larger than the company's worst-case scenario. Banks, he said, will "push back."

Stocks of debit-card processors and banks that issue cards got hit. MasterCard Inc. plunged $25.73, or 10%, to $223.49. Visa Inc. tumbled $9.75, or 13%, to $67.19. . . .