Forum Post: Wedge Issue--Credit Card Fees
Posted 13 years ago on Oct. 11, 2011, 2:14 p.m. EST by amonk9
(3)
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Big banks and credit card processors—Visa, MasterCard, American Express—make tens of billions of dollars from a business that would not exist in its present rip-off form were it not for special laws that favor banks and special interests over free markets and consumers.
It works like this: The banks lobbied for and got special laws and regulations that allow them to charge whatever they want for credit card processing—2%, 3% even 4%--while prohibiting retailers from passing on these charges to consumers directly or even telling consumers about the fees.
Using these regulations the banks have created a highly profitable business giving consumers trinkets—airline miles, flowers for mom—while sucking billions out of the economy effectively pocketing a percent or two off every credit card transactions in the country.
The solution is to repeal the special laws and regulations and instead, require that credit card fees appear on the retailers’ invoice. Then retailers can pass the fees on to consumers, or not.
With these changes, when you go to buy that $500 bicycle you’ve been longing for, the dealer will warn you that using your American Express card (the worst offender) to buy the bike will cost you $15 more than your debit card, cash or a check. And, when you go to your natural foods store to buy $100 of brown rice and tofu, the clerk will warn you that using your favorite Visa (the one that gives you a few miles that you never seem to be able to redeem) will cost you $2 more than using your debit card, cash or check.
Soon, all over the country Americans will cut up their high-fee, rip-off credit cards and use their low-fee credit cards and debit cards instead. And the whole scam business will disappear. Over time, we the people will save tens of billions of dollars per year that the banks are currently sucking out of our pockets.
This is a wedge issue. It effects everyone. Big money banks, lobbyists and special interests are on one side, and consumers and free markets on the other. Occupy Wall Street can push legislators and presidential candidates to take a stand either for big banks and special interests or for consumers and free markets, with I suspect, interesting results.
This one is up for grabs. Make it an issue. Back the banks and bought-up politicians into a dark corner where they belong.
I am a conservative 'troll', and I like this idea.
Congrats to the author for thinking outside of the box, and expressing it intelligently.
The individual makes the choice to apply for, accept the contractual requirements, and use credit cards. The banks are businesses... their goal is to profit. The decisions the individual makes, are solely the individual's responsibility. The also includes mortgages, car payments, and student loans.
Actually, you are not accurate in this case. The banks and credit card processors have effective monopoly power, and this changes everything. Every retailer, hotel and restaurant needs to accept major credit cards as a practical condition of staying in business. The banks can charge any fee they want. It is just the regulation that the retailer can’t pass those fees on to the consumer, and the obvious collusion in creating and enforcing this regulation that should and soon will be shot down.
My statement was completely accurate. To adress your case.. banks are businesses, and have the ultimate goal of turning a profit. Individuals find it easier to use plastic in place of physical money... which results in the placement of debit/credit machines in almost every establishment. A bank, which is a business, can charge whatever they want to maximize profits. It is up to the consumer to decide whether or not he/she will accept the charge. If not, use cash.
Yes, of course the banks should be able to charge whatever they want—I have never questioned that—and so should the retailers including charging fees to cover the cost of credit cards. It is just the banks colluding to control the retailers on a product the retailers must use that is the special interest sanctioned rip-off.
The retailers aren't fully obligated to use the debit/credit machines-though they would find themselves at a distinct advantage if they didn't use them. If the charges continue to an extreme, the free market will clean the impurities.