Consumer Win

On the surface, it may seem as the amendment approved by the Senate to limit debit card processing fees is simply interest group politics: win for the retailers who will pay lower fees; loss for the credit card companies, who will have to get by on slightly less outrageous processing fees.  Since, however, retailers have to adjust to this fees by passing the costs onto the consumer, Visa’s loss is your victory.  Pretty much any loss by Visa, in fact, is your victory.  I love my credit cards, but I don’t know of another industry that tries to do more to screw its consumers (and gets away with it).   Kevin Drum’s got a nice take:

So what are banks going to be forced to do in order to make up their lost profits?

Some experts warned that lower profit margins could lead banks to curtail bank card reward programs.

Ouch! No more reward programs. I think I can live with that. But if your life got a whole lot grimmer when you heard this, consider that what it really means is that for the past decade you’ve been paying about 1% extra on every single debit card purchase you’ve made so that banks could then rebate about half that amount back to you in the form of “rewards.” Anyone who thinks that’s a good deal, raise your hands. (No, not you bankers in the back. We already know it’s a good deal for you.)

Still not convinced? Well, Europe mandates fees about one-quarter ours and somehow manages to support a thriving debit card business anyway.

[Not sure how the graphic will come through, but it’s at the Times article, if it doesn’t]

Just love how everything that might diminish credit card company profits one iota is always deemed a potential disaster for consumers.


About Steve Greene
Professor of Political Science at NC State

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