Welcome to My Cash-Only, Credit Card Minimums Nightmare

Friday, May 14, 2010 3 Comments

All Dick Durbin did was bring the San Francisco way of paying to the rest of America. Here, it's either cash or scrambling for extra items at the register to get to $10 (well, let's be honest, PBR and Camel Lights add up pretty easily so there isn't too much scrambling) and pulling out one's debit card is almost shameful. The only place you can really get away with flipping plastic is at the corner store (the one in YOUR neighborhood, don't get all fancy trying to pull it out at someone else's corner store) and the gas pump. Sure, Safeway doesn't mind but for the most part, it's cash only here tyvm and you can enjoy the same thing in your neck of the woods any day now.

It's for your own good and of course the banks and credit card companies would never EVER just pass along any burden or loss in profits to the lowly consumer, right?


Lawmakers voted 64-33 yesterday to approve the measure from Senate Majority Whip Richard Durbin, who seeks to ensure that debit-card interchange, or “swipe” fees, charged to merchants “are reasonable and proportional” to the cost of processing transactions. Payment networks Visa Inc. and MasterCard Inc., which set interchange rates and pass the fees along to card- issuing banks, fell in extended trading.

“Passage of this measure gives small businesses and their customers a real chance in the fight against the outrageously high swipe fees,” Durbin, an Illinois Democrat, said in a statement after the vote.

The amendment permits retailers to offer discounts for cash, checks or debit cards, or for a particular card brand, and would let merchants set minimums and maximums for credit-card purchases.

“It will prevent the giant credit-card companies from using anti-competitive practices, allow merchants to offer discounts to their customers and restore common sense and fairness to this broken system,” Durbin said in the statement.

The industry escaped previous attempts to regulate interchange on credit cards, which average about 2 percent per transaction, saying the fees are needed to compensate them for the risk of lending money. That argument isn’t relevant to interchange on debit cards, which tap funds held in consumer checking accounts.

There is no scenario that involves the government and money (that's yours and mine if you are playing along at home, America) that can turn out well and you can't undo the plastic habit. Too late, we've already gotten hooked on the "ease" and "convenience" of credit.

Not to mention what a close call this was for community banks.

Jr Deputy Accountant

Some say he’s half man half fish, others say he’s more of a seventy/thirty split. Either way he’s a fishy bastard.


Anonymous said...

Retailers don't want to pay their fair share but want the increased business of debit and credit. Although minimum charges are a value of debate since a candy bar could process a lot to charge than what it is worth, the retailers want the benefits but want to surcharge via a discount method to consumers and want reduced rates.

A check can bounce, people who pay in cash may not have their cash all the time, and it is a issue for the business. However, rick durbin's bill will clarify a discount, of course businesses are already allowed to give cash discounts, but its like a surcharge, and durbin's bill has hidden provisions, for instance amex could go out of business if the store says swipe your visa and we'll give a discounted purchase.

Swipe your debit and maybe give a 3% discount, now let's lobby washington to make sure they can come on in regulate with the banks can charge us. The national retail foundation is opposed to minimum wage and other laws, but only because they are a special interest group. I can't blame them, its a smart idea and even "conservative" republicans have gotten on and did contract and price fixing regulations.

The result may be to have consumers be forced to carry cash and multiple cards. Nobody wants to pay and hold out on a discount if the seller says they will give you a cash price for less. Community banks are not really exempted because merchants would be allowed to discriminate against which payment you provide.


While I appreciate the thoughtful and comprehensive comment, my point is this:

It comes down to consumer responsibility.

When I go to a store and use my debit card (where I dare), the merchant will often ask debit or credit. Already knowing that my bank would much rather I use credit but it makes no direct immediate difference to ME and costs less for the merchant to do debit, I generally say debit. If I did not know these facts, would I be more likely to say credit?

Instead of being educated consumers, we leave the door open for the Nanny State to dictate the terms and conditions of commerce. In a perfect free market, consumers would decide if terms and conditions are acceptable or not. In our decidedly anti-free market system, it has come down to needing Washington to decide for us.

I don't like that. I like an educated consumer who is equipped to battle the big banks. Otherwise the banks will always win.

Anonymous said...

Following Up,

I don't think this is a fight between the consumer and big banks rather than it being big retail and big banks. If you pull out your debit card does your local or wherever you shop offer a discount.

The trouble is that even though small banks are exempted from the debit card interchange fees, the big banks by lowering it will price them out of business since Washington is essentially dictating what price who can charge which.

"Big Banks" are not always bad, they are but its not always because they are big. A small business could be unfriendly and not nice also. Also , big business can make things more efficient and convenient.

Of course big banks consolidation means less options for the consumer via services but that's a different topic. The idea is political and that's how one special interest got washington in and its not in the educated consumers interest, aka what happened in the Australian way.

Don't also forget many small businesses and cash only places are tax evaders, what they will love is this, credit cards provide increased businesses and services, so they want to take them but they want washington to set the price they pay, and to dictate the terms of the contract.

However, in the event the customer has cash we get the ability the do tax evasion also, its a double win via Washington, so let's lobby to get the best of both worlds while getting price cut since we can't tax evasion or surcharge easily in certain instances with credit cards.