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Banks' newest game: Debit card fees

Faced with new credit card restrictions, lenders are touting debit card loyalty programs. But many come with fees that may not be worth it for consumers.
By David Ellis, CNNMoney.com staff writer
Last Updated: November 23, 2009: 4:15 PM ET

NEW YORK (CNNMoney.com) -- Could debit cards be the next cash cow for banks? If banks have their way, they will.

Americans have conducted more transactions and spent more money using debit cards than credit cards this year -- the first time that's ever happened.

Next year, consumers are expected to spend $1.64 trillion with their debit cards, nearly two-thirds more than in 2006, according to the payments industry trade publication The Nilson Report.

And there is no indication this growth is slowing down anytime soon. Not only are Americans increasingly reluctant to take on more debt, but banks are expected to become more stingy with credit cards once new federal legislation takes effect next year, which could make the debit card the preferred form of payment for many consumers.

This hasn't gone unnoticed by large and small banks, who are currently looking for ways to wring any extra dollars out of their business at a time of severe loan losses.

"Banks, just like airlines and local governments, are looking for fee income to fill the revenue gap," said Greg McBride, senior financial analyst with Bankrate.com.

What is shaping up to be an area of focus for lenders are loyalty or rewards programs for debit card users.

A concept that has long been associated with credit cards, increasing numbers of banks have looked to such programs as a way to generate more fees from consumers.