In an effort to catch up, MasterCard and other rivals eventually raised fees on debit cards too, sometimes higher than Visa, to try to woo bank customers back.
But now we can’t lower their fees too much because we have a less-secure system intentionally moved to by the banks and card companies to extract more rent? Nice.
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Everybody should bank at a local/regional stable bank or a member-owned credit union. I happen to ask at my FCU and they have never sold a mortgage. They lend and keep the mortgages as OUR investment w/returns. Old fashioned. I like it.
Also do not use ANY plastic. It is a total myth that you cannot rent a car or reserve a motel room without a plastic card. So, I asked the guy -- "I do not use credit cards at all -- do you want me to rent your car or NOT? " Suddenly there was a way for me to rent the car. Now, isn't that interesting.? Check it out ahead of time, though -- it requires a hold of a few hundred on your checking or savings account as minimal "collateral." The trouble with not using cards, of course, is that you DO have to buy only what you have the money to pay for. That is old fashioned and rather refreshing, as well. Thing is? If we would all do that, we would seriously affect the greed addicted financiers. FUIN!
#1 Posted by LizzyD, CJR on Mon 14 Mar 2011 at 09:05 PM
Ryan
I fear you have misunderstood or misrepresented much of my article. I could perhaps have been more explicit in places. But you are selective in what you choose to cite from my piece and disregard the arguments I make against the banks.
So allow me to retort:
1) I don’t “trot out the industry’s line”
I have not swallowed the banks’ arguments hook, line and sinker. In fact, I call them out on a pretty heinous bit of sophistry, which you chose to ignore so I’ll paste it myself:
Aren't the banks overstating their case to keep their revenue?
They're certainly guilty of being alarmist at times. For example, the American Bankers Association tried to pull a fast one by conflating revenue with capital. It claims that losing $10 billion or more of fees would eradicate the same amount of the capital and thereby lessen by up to $100 billion the industry's lending capacity.
I also, later, call into question the argument that some banks, trade groups and even regulators have raised: that merchants would refuse to take debit cards from smaller banks exempt from the fee cap -- which you also ignore
2) Robbing Peter to pay Paul
You don’t tell your readers that what I wrote was a Q&A, Yes, it still contains a view, as do all our pieces. But a Q&A usually involves stating both sides of the argument. I don’t take a side either way on whether merchants would pass on the savings or not. I point out that one side argues they will (which you chose not to quote), while the other argues they won’t.
I will concede, in retrospect, that the Australia case is not a great one to use. But the lack of sufficient evidence you and Rortybomb mention renders it useless as an argument for the merchants to employ, too. So we’re back to a he-said, she-said debate between banks and merchants.
It’s naïve to assume that any windfall one part of the corporate establishment gets from another will definitely trickle down to consumers. As cutthroat as retail can be, its bosses want to make a profit and, just like bankers, are hardly immune to greed. Remember Bob Nardelli’s $210 million severance package from Home Depot?
3) My piece isn’t “blaming the government for the signature debt fiasco.”
I don’t understand how you reached that conclusion, even allowing for the fact that you ignore both the heading of that section, entitled “What’s the solution?”, as well as the sentences that come after the section you quote.
The “trick” I am referring to is not some past transgression you have imagined I am blaming the government for. Instead, it refers to an opportunity Washington missed. The Durbin Amendment focused just on cutting fees. A more considered approach would have used the threat of lower fees, whatever they end up being, to harangue the banks to adopt a far more secure and efficient system for transferring money, including a debit card system like chip and pin. The Fed does actually mention it, but it’s buried deep in the proposed rule.
4) Why I think the Fed’s interpretation of the Durbin Amendment needs a do-over
Simply put, it replaces excessive fees with inadequate fees -- the cap of 12 cents per swipe covers, at best, only some of the costs incurred by the banks. That’s not taken from bank lobbyists, but from the Fed’s proposed rule.
Even Senator Durbin appeared to allow leeway for the banks to make money. Check out the original language in the Dodd-Frank Act, which I also cite in my piece: banks should charge a fee that is "reasonable and proportional to the cost incurred.” The Fed has overdone it.
I see nothing wrong with banks charging for a service they provide to both merchants and their customers. Nor do you, it seems, as long as they’re a “local credit union or community bank” -- which of course are exempt from the Durbin Amendment and so will be allowed to continue charging whatever fees they choose.
#2 Posted by Antony Currie, CJR on Wed 16 Mar 2011 at 12:55 PM