We've all run into it a million times, we go to the convenience store and are faced with the choice of debit or credit when we go to pay for our gas and goodies. The vast majority of us never stop to consider the ramifications of this everyday choice, but perhaps it is time that we do.
As the vice president of a small company that accepts credit card payments, I can tell you that while it is a very good method for making a sale, it is also a costly one. Our business is web based so we are paying gateway fees, clearinghouse fees and then a percentage of each sale to the credit card companies (banks). We, as do most businesses, pass that cost on to the consumer in the form of higher rates not because we want to, but because it is the only way to stay profitable. These fees absolutely result in higher consumer costs, monies which wind up directly in the pockets of bankers.
Bankers are worried
I was checking out the news on Google this morning when I came across the banner ad (featured above) on the Fox website. You have probably run across one of these advertisements yourself as they are plastered on billboards, buses, trains and everywhere else imaginable. These days if you don't at least have a debit card you find it increasingly hard to buy anything, so of course this piqued my interest. Clicking on the ad took me to http://www.dontmakeuspay.org/, since I never rely on anything I find on FOX to be anywhere near accurate, I began to read through the information presented on the website. So what is it all about?
I believe that banks, just like anyone else, have a right to fight actions by the government that they feel are harmful to them. I wonder, however, why they feel that they must do so in such an underhanded way. When you click on this advertisement you are greeted with headlines such as: "Congress and the Federal Reserve want to force YOU to pay more to use your debit card. - No more rewards -- Higher Fees -- End of Free Checking". Then they provide a handy-dandy pre-written email form so that you can write your congressman and tell them that you want them to reverse the law in question. A thinking man has to wonder, "Why, if their cause is just, must they resort to obvious scare tactics to garner support"? This site is run by a political action committee, paid for by the banking industry. If you look at the contact us page, your email is directed to electronicpaymentscoalition.com. A whois search of the domain provides no ownership information. This website features more of the same, there will be dire consequences if this law is enforced rhetoric, albeit in a somewhat less sensational and intelligent manner.
Dodd-Frank is the law that has the financial industry in such a tizzy. Specifically they are fighting an amendment to the law which places a cap on what they are allowed to charge a business (largely retailers) for swiping fees when consumers pay with their debit card. The current average rate they charge is $.44 per swipe of the card. The law when finally enforced by the Federal Reserve will limit them to a $.12 fee per swipe. Coincidentally, if you pay with a debit card and enter your pin number, there is no additional fee charged for the transaction.
Now the banks contend, rather vociferously, that this will ultimately cost you the consumer as they will have to charge you a higher amount for something else to make up for the loss in revenue, forget that you are already paying for it anyway. You can call bankers a great many things, stupid not being one of them. They are not oblivious of the fact that their industry is not very popular with the public, this really does explain the tactics they have chosen to employ. After all, who would write their congressman asking them to please let the banks continue making the obscene profits to which they have become so accustomed? In the end the law is just going to cause them to resort to some sort of fee structure that will more likely be in your face, than hiding behind the scenes. They, of course, do not want to appear to be greedy or heartless.
The biggest supporters of this obfuscation of truth campaign reads like a list of the usual suspects, and leaves out only Kaiser Sose. The following is a quote taken from an article on The New York Times website in the Business Day section (click here
"The banks are already trying to make up for the lost revenue, with lenders like Bank of America, JPMorgan Chase and U.S. Bancorp charging fees for things that once were free, like paper statements or online banking."