Expanding the field of progressive ideas is never easy. We are a mixed bunch with many causes and sometimes it can be tough to figure out which ones are worth going for. Here is one suggestion.
I am working with a group called the Merchants Payments Coalition, a collection of retailers from restaurants, convenience stores, grocery stores. They don’t have a lot in common — their markets are diverse and sometimes competitive, but one thing they agree on happens to be something U.S. PIRG and other progressive groups have been talking about.
The issue is Interchange Fees, a very complex (this is on purpose) fee imposed by the banks that issue credit cards for MasterCard and Visa. The fee is charged directly to merchants — so their interest should come as no surprise — but it is important to remember that ultimately this fee gets passed along to consumers in the form of higher prices on all products.
So what’s the big deal about that? Fees are a part of life, just part of doing business, right? Not in a market that is essentially a duopoly. Visa and MasterCard together control 80% of the U.S. credit card market, and the banks that issue their cards are usually the same banks (JP Morgan Chase) so they wield monopolistic control of the market.
There is also no way to avoid this fee. You can pretty much avoid any credit card fee if you don’t use credit cards — but not this one. One of their tricks is that any merchant who accepts credit cards cannot offer consumers a cash discount. Studies show that only 14% of the money collected from interchange fees is needed to cover the cost of processing credit card transactions. This means that a whopping 86% of the fee is extra profit for the card companies, or even worse, helps fund reward programs for high-income credit card owners.
Every time a low-income consumer purchases something with cash at a store that accepts credit cards, they are subsidizing plush reward programs for wealthy credit card users. It is essentially a reverse Robin Hood wealth transfer, from the poorest members of society to the wealthiest, and it is being encouraged by the card companies, who continue to offer even greater reward programs. A low-income consumer with a poor credit history is not allowed to enjoy the benefits of these reward programs, yet their hard-earned money helps fund them.
Now that we have a Democratic Congress, the use of committees is very important, and one we should put our stamp on is the Banking Committee. Chris Dodd has already started hearings on hidden credit card fees and predatory lending. Warren Reports at TPM Café followed that on the week it happened, and there is another diary on this subject at My Left Nutmeg.
What we need are more hearings to put further pressure on the credit card industry. Dodd is off to a good start, but we need more action. A major problem is that the interchange fee schedules and agreements are kept secret by Visa and MasterCard. First and foremost this is a matter of transparency — and the lack of it is hurting people’s pocketbooks. It doesn’t cost you much with each purchase you make, but it adds up fast. In fact, it’s the single biggest fee the card issuing banks collect, costing consumers $30 Billion dollars last year alone.
I encourage members of this community to help us put pressure on the credit card companies in order to convince them to provide more transparency and lower these inflationary fees.
Note of disclosure: I am writing this with input from others who are working with me to help raise awareness of this issue, so you may find a similar version of this diary on other progressive blogs. This is an important issue, so we will be around to follow up.
Visa
Mastercard
American Express
Discover
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Isn’t that four? Sure, they’re not 25% payers each, but that’d be extremely rare in any industry where there are four players.
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So, while AmEx and Discover only account for 20% of transactions, what do their fees look like? More, equal, or less than Visa or Mastercard?
My understanding is that in most spheres of the marketplace, Visa and Mastercard are the only ones that matter, and Amex and Discover are completely insignificant. I wonder what that 20% figure you quote comes from. Is it, perhaps, the total percentage of transaction value? If the average Amex user spends 10 times as much as the average Visa / Mastercard user (and, in fact, the typical Amex user probably puts their smaller transactions on Visa or Mastercard and only the larger ones on Amex), then Amex would come out looking like a whoppingly disproportionately larger share of credit than it actually is, if measured by dollar amount, yet that would still have little impact on the vast majority of merchants.
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The important statistics, I think, would be what percentage of credit card merchants accept each kind of card, and what percentage of credit card merchants do more than 1% of their credit transactions through anyone other than Visa and Mastercard. I expect both of those to be tiny, certainly nowhere close to 20%.
AmEx and Discover are single-issuer cards. That means you can only get them from AmEx and Discover.
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Visa and MasterCard aren’t really companies in the same wasy AmEx is. The history is a bit different for both (I think the Wikipedia pages do a pretty good job of giving the background) but they are mere brands owned by the banks that issue those cards.
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The top issuer as I said is JP Morgan Chase. I’d have to check, but I’m pretty sure the next one is Citi. So it’s not really Visa and MasterCard that we’re targeting — it’s the banks that own them.
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Of course, you have to concentrate on Visa and MasterCard first. Kind of annoying. And not entirely an accident, I’m sure.
That changed last year. AmEx won a lawsuit against MasterCard and Visa that forced them to stop having agreements saying that any bank which offers Visa or MasterCard can only offer those two. You can now get AmEx cards from a number of banks (at least including Citi). Discover will presumably be interested in doing this too.
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From what I have read, Discover and AmEx charge more than Visa or MasterCard.
At least with respect to Amex, it is a lot more. That is why many retailers don’t accept Amex at all, or have a minimum charge for Amex.
Frequent flyer miles already disgusted me, and now you point out that people paying cash are paying extra to buy these people their tickets! ARghhe! I hate banks. We should eliminate rewards programs altogether, especially airplane miles and things that encourage useless travel and tourism. We need to burn as little jet fuel as we can, not force poor people to pay for it being used frivolously on trips people dont need to take.
The rewards cards are insidious. They’re like tax cuts — it feels good to get that bigger check up front, but what you don’t see are the budget cuts made years down the road. Same here. 500 miles! But you don’t see the people whose collective pennies paid for it.
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Even debit cards without rewards have some interchange fees, and that’s fine when they go to paying for the transactions between banks.
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I should also add, I am not calling for the complete and total end of interchange fees. They do serve a limited purpose, but they have been used for things far beyond their purposes — like frequent flyer miles.
The rewards programs are not funded directly by the interchange fees. The two issues are unrelated. Credit card companies get most of their money from interest charges and late fees. They use the rewards programs to attract people on the theory that everyone occasionally pays late and carries a balance, so if you always use their card they will get that money. Most of the rewards programs provide rewards that are larger than the interchange fees. There is no reason to think that eliminating the rewards programs will do anything other than increase credit card company profits.
….reward card are often (if not always) charged a higher interchange fee. Interchange contracts (I’ve seen them, have you?) are dense and delineate that certain cards will pay higher interchange fees and that includes rewards cards.
Nilson Report (NilsonReport.com, I think) is a payments industry publication, and according to them, interchange accounts for more than all the other fees combined.
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Not that I’d fault anyone for missing the fact — the agreements merchants sign in order to process Visa and MC state explicitly that they can’t tell customers about it, so the banks are deliberately trying to keep their true size (and use) quiet.
The banks regulary confiscate ENTIRE BANK ACCOUNTS of poor people and tell them they OWE THE BANK money. A person can deposit their entire paycheck each week, spend only half of what they deposited, and when they go to withdraw their savings, find themselves IN DEBT TO THE BANK instead of being able to pay rent. My girlfriend was in tears in the bank when they did this to her. Her crime? Using her debit card in stores with a percariously low balance, and then not noticing that her balance had a little minus sign in front of it when she would make deposits. Banks allow people to withdraw more than their balance without telling them!! And then they charge you an additional $30 EVERYTIME you use the card, even on a $2 purchase. And every day it is below zero, they tack on $5 more to what you OWE THEM! And they have the nerve to claim that they do this as a SERVICE, a FEATURE, to keep people from being embarrassed. And the people in the Statehouse banking office had the nerve to repeat that to me, that they claim it is a feature. I felt like strangling the poor kid they sent out to talk to me, but it isn’t his fault.
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This is criminal theft, Sovereign bank took over $400 dollars from a struggling waitress. They had the nerve to give ONE overdraft charge back, “as a courtesy”. Gee thanks. I took a handful of lollipops, but that didn’t really make up for it.
Without a meal plan, I depend on getting regular, small doses of money from my mother. She basically tosses $50 a week on my debit card for food & gas. Since it’s not really a large amount, it’s inevitable that I’m going to overdraft from time to time – and it’s probably occurred about 4 or 5 times over the past 2 years. So, I’ve given the bank upwards of $150 dollars, even though my total overdrafts have probably amounted to $20. It is pretty downright scandalous, imho. I could see the fees if you didn’t pay the money back within 2-3 days, but I’ve always paid right away, or if I overdrafted by a lot, but there should be some kind of lienancy – especially for people most at risk. These kinds of policies hurt those who could least afford to pay for it.
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You can, at most banks, add on a line of credit to those cards… but of course, at most of those banks, that cost a fee in and of itself. It’s still worth it for people like your gf and I. I actually need to go back to my old bank, where I had that protection, so it won’t overdraft again and have to throw another $30 away.
and only use it in real emergencies (twice lifetime). I then immediately replenish it before I spend another dollar elsewhere.
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Why not do the same thing with your bank card? Put in an extra $20, and never let it get below $20, just as you currently try to never let it get below $0. Then, you’ll be saving yourself roughly $150 every two years.
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With all due respect, it’s called responsibility. I agree that the fees are out of control and that people make mistakes from time to time — but there are plenty of alternatives (like mom mailing a check to your bank once a week for $50 and you taking money out from an ATM).
Why do people insist on defending these evil practices? We don’t have to allow them to do this kind of stuff to people. It really ruins people’s lives – they can’t make rent, they have to move, or they can’t move because they can’t make first and last, so they get stuck. And meanwhile some asshole is flying to florida on their backs.
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don’t give me any advice on how to avoid the fee. Eliminate the damn fee!
1. Easy on the language.
2. I wasn’t giving you advice at all… I was giving Ryan advice.
3. Why don’t we get rid of all fees? Late fees, all of it. The nice thing is that now we can just pay all our bills, you know, when we get around to it. Overdraft? Nah — we should be able to spend more than we have, and the banks should cover the difference out of the goodness of their hearts.
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Look — the financial packages that banks are offering aren’t great. But, the real problem is that people are being irresponsible. They don’t understand (and they then assume) how their tools work. When it turns out they’re wrong, they get hosed. What else is new?
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It’s your money. It’s your job to be smart with it, including understanding how to engage in the process of spending it wisely.
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Late fees, overdraft fees, etc aren’t good nor evil. They’re a tool to encourage people to be “in the black” at all times. And, believe it or not, you can still pay cash for dang near anything.
They’ve been stealing money, and they should return all of it, plus interest. They don’t have to allow a transaction to go through if there is not enough balance to cover it, they can easily change the program so that it declines the transaction. They don’t even offer people this option, or explain how big the fees are. they also could easily place an automated phone call to the person informing them of the situation, but they don’t. These are things that the Banking Commission must force banks to do, but they can do it on their own first and avoid being found guilty of stealing my poor friend’s hard earned money. I’m really offended that you just say she was stupid. She thought she was doing the right thing by saving her money in a bank and was devestated that she owed the bank hundreds of dollars instead of having her rent money.
And sometimes ridiculous … BoA has randomly tacked on fees for their own mistake (deposited money that cleared fully 3 days later disappeared from my bank account for no reason, then they tacked $150 in fees) …
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However, with lots of banks you can set up email alerts to send you emails when your account is low, or a high transaction has posted or something. That is in effect “calling you” to alert you.
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I have to use BoA for various reasons, so I don’t really know about other banks, but they definitely have it … about 15 different types of alerts you can set up on your account. and if your email is a text messaging email, you can get the alert on your phone.
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Read the fine print. The fee structure is there. Every time it changes they mail you another page full of fine print. If you didn’t read it, shame on you. That makes you a fool, not them a thief.
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That is (generally) true, but so what? Just like you can bounce a check, you can bounce a debit card. They charge you a fee for doing so. Don’t do it.
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True. Could they? I’m not sure, to be honest. I don’t know how “instant” all bank transactions really are. It would seem like some are, but others may have lag, making it similarly preposterous as arguing that the bank should call the merchant when you’re about to pass a check that won’t clear.
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Yes, yes they do. Read the dang print. It’s there.
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Surely you jest. Nobody expected this out of their bank when they were writing 10-25 checks a month, and yet they do now? Puh-leaze. That system isn’t free, but you want banks to pay for all this crap to protect people from spending more money than they have?
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Here’s a secret: if you want to spend more money than you have, use a credit card. Now, here’s the other secret: if you do that, the credit card company will allow you to go over your limit, and then charge you just like your debit card will allow a negative balance.
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A [person who refuses to read the fine print and doesn’t understand how his bank card really works] and his money are soon parted. That doesn’t make it theft — that makes it honoring the agreement he made with the bank well before spending more money than he had.
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RIF. I never wrote the word stupid. Irresponsible, sure. I stand by that. Ignorant (of the fees) — certainly, you wrote so yourself. Foolish? I’d say so. But, I wouldn’t make a connection between intellectual ability and financial savvy.
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Hey man, it’s a bummer. Really unfortunate. So, is the lesson (a) that banks are crooks, and we ought to all keep our money in gold bullion hidden under the mattress, or (b) that it’s important to read the danged paper they hand to us so that we can understand how it works — or, at the very least ask a bunch of questions.
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The fees are out of control, and I wouldn’t be opposed to legislation limiting the single instance and total dollar value of fees in a time period. But, the existence of those fees is reasonable to me. Banks lend money for profit. If you’re borrowing from them, you owe them. If you borrow from them without explicitly detailing that borrow ahead of time, you’re putting them at risk and requiring that they have the infrastructure to collect. That’s even more costly. Frankly, I’d rather they not pass those costs onto responsible customers who are capable of keeping track of their money and thereby avoiding those kinds of fees in the first place.
you are pissing me off! They took advantage of someone. Yes if it is was you, you woudln’t have LOST ALL OF YOUR MONEY TO A HUGE FUCKING BANK. Good for you, you get a big boy star, all grown up aren’t you?
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One of the transactions that they sharged her $35 dollars for was a fucking Save The Children automatic monthly deduction. This of course put her below zero again and led to another forty or fifty dollars of fines. This is 900% interest. If they want to lend her money they should give her a credit card, not fine her to fucking death. This happens to lots of people, not everyone knows how to avoid scams and fees or take advantage of deals that rich people just fall into. Some people lose their homes to predatory lenders, do you stroll by and helpfully tell them to read the fine print next time? You’ll get your neck size reduced.
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Of course it is possible to give customers the option. Yes, it might bring us back to the old days when we had to wait a bit for a credit card transaction to go through, but at least we aren’t looking numbers up in books or phoning in for a auth code like I used to have to when I was a cashier.
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We can make the banks jump through whatever hoops we want them to, and the most important hoop is that they should protect poor people’s money as if their lives depended on it, because in many cases it really does. The chain of misery that is caused by one low income person losing $400 is long, it means lots of people don’t get $400, and means lots of those same people probably get hit with even more late fees. If protecting people’s money better means you don’t get as many trips to FLA, well, that’s good.
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Please don’t reply again telling me shit that I know better than you, obviousfuckingly. It’ll make me kick over the refrigerator.
Then drop some f-bombs when you hurt your fit and break the fridge door, go to Best Buy and put a new one on your debit card. Overdraw, and get charged the fee. Then drop some more f-bombs.
I noticed you didn’t try to give helpful advice about how to avoid the fee. Maybe my language got through, you see that it makes people pretty fucking mad when a bank charges them 900% interest and takes all of their money away, and how explaining how you avoided the fees is really beside the point, and makes you part of the problem. Where’s her money? In your rewards, and you just maybe feel a little guilty about it. This ruins lives. F-bombs are called for when people are acting so callous.
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One of the first things I would do if I was governor would be to arrest a few bank managers for theft and loan sharking, and make them give back everyone’s money, plus interest. These fees have to stop, they can’t be allowed to keep doing this to people when it is so easy to stop them.
stom, i agree with you — personal responsibility as the first, second, third resort.
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however, i struggle to actually understand lots of fine print on various bank/financial documents. i’m college educated with a reasonably tasty vocab, but there are so many lawyerly terms, the fine print can border on impenetrable — almost like deliberately printing in a foreign language.
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in addition, i have often found distance b/w what an employee will tell me (sometimes they’re confused too; sometimes they just want to get the transaction done) and what the documents actually say (usually far less appealing).
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i hesitantly point it out and they sort of shrug.
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the SEC has tried to apply some “plain English” rules to mutual fund prospectuses. i wonder if some sort of “plain English” rules could be applied to credit card and bank statements.
It’s “personal responsibility” all the way up until i nail you with these leftovers, and then it’ll be “Police! Police!”
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Some people need help and protection from companies that don’t hesitate to TAKE ALL OF THEIR MONEY. Why doesn’t that sink in, how terrible that is? She didn’t do anything wrong, she didn’t hurt anybody. She did not cost the bank any money. She was lucky to make 50 bucks waitressing all night in Harvard Square, and they just zap it right out of her account. All of it. She’d make a deposit, and it wouldn’t get her back over zero, but she’d think she put in a hundred bucks. Next thing you know, they’ve charged her another 80 bucks for two transactions and two days of being under zero, when she thinks she’s saving up for rent.
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It’s unacceptable, it’s robbery, it really harms people who need government to protect them. Even if the person she talked to when she applied for the account had used “plain english”, my friend would probably still would have gotten in trouble, just because she’s not very good with math or money or banks. She’s not very responsible, OK? But does that mean banks should be able to take all her money? If we protect her with police when she walks home later than a personally responsible person would, shouldn’t we protect her with laws when she uses her card?
And believe me, I use ALL of it already – when possible. However, for a solid year I just didn’t have that extra twenty. I checked my how much money I had almost daily and, sadly, miscounted once or twice by a dollar or two. Another one or two times, I didn’t account for the dollar or so fee they charge you for using it.
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The first time it happened, it was truly Bank of America’s fault. In all the paperwork I had signed when I opened the account, they said “do you want overdraft protection?” – the kind where if you go over your checking, it’ll take money out of your savings, vice versa, without charging a fee. I said yes, but when I actually overdrafted suddenly I was told I never signed it. I’m 90% sure that somewhere along the process, the fact that I signed for overdraft protection never made it onto my account. So I was screwed for like $40-50 bucks that time, but I couldn’t prove I actually signed it or that it was their fault… and I was stuck in DC with $2 in my wallet and couldn’t even afford my metro pass, so it wasn’t like I could jsut close my account with them out of disgust (I was living in DC at the time, doing an internship).
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In my mind, there are a few changes that should be made:
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1. People should have the option of choosing to not allow any transactions to take place if there isn’t enough money on the account. 90% of the time, I’d rather not be able to purchase anything than get charged an overdraft fee (there was one time where I did intentionally buy something that put me in overdraft; I didn’t really have a choice and didn’t especially mind the charge that time).
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2. Allow at least a 24 hour grace period after an overdraft, that could be used at least once or twice a month. Everyone’s going to make a mistake – and if people immediately rectify it, no harm, no foul, right? In all but one of the times I overdrafted, I paid it back and more within 24 hours.
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3. Yes, banks should be able to charge overdraft fees, but they should be proportional to the amount you overdrafted. I’ve never overdrafted more than $15.99 dollars at the time. In all but one or two of the cases, I was only off by $1-3 dollars (which an ATM fee, etc. could even trigger). Because of a few very human errors, those $1 or $2 dollars turned into $20 and $30 dollar fees – and that’s fundamentally unfair. I could have spent $100 and still only have been charged the $20 or $30.
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Lastly, people need to keep in mind that while personal responsibility is exceptionally important, ultimately everyone is human. Government and society is based on people – not corporations. Corporations are only free to exist because we, the people, allow them to. I’m not saying we should become socialists and destroy all corporations, I’m only saying that we can feel free to create laws that put the onus on businesses – not the other way around. We can create laws that protect people from what are unfair business practices, created to prey on people who can’t avoid them no matter how much they try. Businesses may create policies that pray on those who can least afford it, but governments should create policies to protect those who most need it. After all, before you can pocket that $20 for emergency, you need to actually have it. When you’re living off just a little more than that a week, in terms of everyday expenses, you don’t always have that luxury.
but the thing is, when you bounce a check (or overdraw your debit card), it requires a series of events regardless of how much you went over. So, in that sense, a flat fee is reasonable since the interest on the amount of money is negligible (18% apr on $100 is approx $0.34 a week).
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So, it’s frustrating to just go over by a smidge, but from the bank’s perspective, $0 – $100 is all “a smidge.”
You charge the cost + a reasonable %. Penalty fees are a very large source of a bank’s profits, they clear way more than a profit margin on any overdraft. Furthermore, that ignores the easy option of allowing people the ability to make it so their card simply couldn’t make a charge if there wasn’t enough money on the account.
I have no idea how much it really costs the bank (in a fixed sense) once you factor in the infrastructure requirements, training, procedures, etc. They’re obviously not losing money on this, but it clearly costs more than $0. Should they make profit on this? How much is fair? I don’t know, and as a result I’m apprehensive to claim just how much the fee “should be.”
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As for not allowing a deduction that will overdraw, I suspect that it is possible for them to prevent that some of the time, but not all. What percentage? I have no idea, but I’d expect that percentage to go up over time, as more and more becomes “fast” electronic.
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I do think it’s reasonable for the state/fed to require the banks to offer the opportunity to not overdraw — that is, to not allow you to make a transaction when you’re already over the limit (credit card) or under $0.00 (debit card). As for the transaction that actually puts you over the limit, that’s far more complicated because charges aren’t always “instant” — some get processed at a later date, when you’ve already bought the stuff, particularly for credit cards.
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I don’t know much about debit cards, since I’ve never used one. Why not? Well, a credit card offers me fraud protection (debit doesn’t — somebody defrauds you, they empty your account), offers me 1% cash back, and has a high enough credit limit that I’ll never even sniff overspending. Debit cards are just a bad deal compared to credit cards, and they always have been.
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This is also an interesting market failure. These features that consumers want are fairly well known, and there’s plenty of banks. Yet, we don’t see these features? Why not? Well, because these features are attractive to the kinds of people that banks don’t necessarily want as customers. Banks don’t want customers who both (a) keep a low balance and (b) never incur fees. It’s low margin, possibly negative margin for the bank. If you violate (a) they do well by lending out your money, and if you violate (b) they do well with fees. You’re (b). I’m neither (a) nor (b). Banks like you more than me. By providing a (free or very low cost) service to help you avoid paying (very not-free) service costs, they simply attract low profit customers.
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So, government intervention here could very well be appropriate. Exactly where (limit on fee price? not allow people to overdraw?) is a much harder question, and the law of unintended consequences may not bite everyone, but it will bite a few along the way.
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And hey, check it out. We’ve had a long interesting discussion with differing viewpoints without cursing or being nasty or kicking the fridge. Go figure.
My debit card actually does have fraud protection – and I speak from experience there. (My card was stolen once upon a time and I had to have several charges removed.) I don’t know if my card is special somehow, or not.
Your advice about keeping a “hidden” $20 in your wallet for emergencies is good, but your condescending tone toward someone for whom money is obviously very tough to come by betrays your lack of experience with tight times. If you only had to dip into your 20 dollar emergency fund twice in your life, I don’t think you are even qualified to offer advice to someone who is chronically running out of money. Lack of money is lack of money. And I agree with those who say the fees are out of control and I think they border on cruel and unusual punishment without due process. As the writer states, one mistake resulting in a $20 deficit can end up costing twice as much and more. It is really immoral what the banks and credit card companies can charge. But that is the world we are living in. As long as you have reliable cash flow and can live below your means you are okay, but it can take a long time and focused effort to get to that point. Usually, going to school and getting a degree or some professional training is part of that process, and with the cost of higher ed, it can be very difficult to make it all work, and there are many opportunities to fall into the cracks. This writer is fortunate that s/he has a mother who occasionally puts money into his/her bank account. Learning to manage money is very difficult if there just isn’t enough money. One person’s difficulties in learning to manage their low income does not take away from the fact that the fees banks are allowed to charge are outrageous.
….that using cash is your best alternative. You can’t overdraft your wallet.
….as the banking industry is, the rules and regs that govern this industry seldom if ever dictate fees. There are many references to fees being “reasonable” or some other similar construction, but I am not aware of any direct regulation regading the level of fees to be charged. Revison of this industry in this regard will be an uphill climb to say the least and the banks will protest with substantial precedent of their side. Also, I am dubious of the concept that having these fees reduced will roll down to the consumer. I think on average merchants are charged about 2% (give or take depending on the transaction). If that goes down to 1% are we all going to pay 1% less for everything? I imagine the answer to that question is no. I am also afraid of the credit card banks bargaining with consumer protections in getting this passed. Currently, if used properly, credit cards provide consumers with unparalleled protection. You can never be charged more that 50.00 for fraudulent or incorrect charges (and in most cases consumers are charged nothing) and consumers can raise defenses against merchants with the credit card banks if products or services purchased are not up to standard and can’t be held liable for payment for defective products or service. Merchants and banks alike would have no issue seeing that bargained away as a “concession” for lowering fees. I realized I am going straight to the worst case scenario, but I see in this the potential for merchants to keep more and consumers to loose valuable rights. I don’t think it is worth the gamble.
You don’t think we should even try to change it?
…that is not what I said. I said that it would be hard and that if the banks were going to play ball there is a good chance that they would use important consumer protections as a bargaining chip and that merchants are probably not going to pass the savings along. As I result I conclude that this is not a problem worth gambling on. I’ll gladly pay the extra 2% if it means I can avoid paying for fraudulent charges and continue to raise defenses for bad merchandise. Now if in 10 years the average is 5% I will have a different opinion. Currently, I think I’m getting what I pay for.
Since there is little/or no problem charging Sales Taxes at the time that the transaction occurs, why couldn’t the applicable Intercharge Fee be added on to the individual sale instead of being rolled into the merchant’s overhead?
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Wouldn’t that actually be an incentive to charge as little as possible? Say AMEX charges 3% and Visa charges 2%, wouldn’t there be market pressure by the consumer to use the lowest fee provider? Don’t tell me that the Credit Card companies oppose a free market?
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And if you want to save the fee, just pay cash.
That would be a violation of the merchant agreement. However, it might be easier to change the law so that it would be a required part of the merchant agreement instead of a violation of it, rather than trying to regulate the level of the fees.
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Of course, to be fair, the stores should also figure out how much it costs them to process cash (counting it, making deposits, cash-on-hand not earning interest, change-making mistakes, increased risk of employee theft) and charge a cash fee as well. I suspect that if the interchange fees were lowered to their true cost, they would actually be lower than the cost of doing cash transactions. Electronic transactions are much cheaper to handle, which is part of why companies prefer to pay people through direct deposit instead of handing them cash every month (or even giving them a check to deposit).
This issue is very complex and would be extremely hard to change – though I’m not saying we shouldn’t try.
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I just think that if we want to restore a little balance in the consumer-credit card divide, we should focus on repealing the Bankruptcy Bill first. It’s far more black and white and potentially more devestating to people. Whereas the intercharge fees hurt a lot of people a little, the bankruptcy bill is a devestation laid upon a very great many people too.
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Credit card copmanies have been going through years of record profits, usually at the costumer’s expense. It’s time they pay their fair share toward society and not be able to rob the populace blind, especially those who can least afford it – who, coincidentally, are the people credit card companies most often target.
…in regard to credit cards an bankruptcy. No one is forced to use credit cards. Now bankruptcy and health care costs I can get behind, but credit card use is voluntary.
For famileis with a moderate amount of credit card debt who lose their job, a loved one, get sick, for some rational reason can’t work (caring for a family member, loss of a job, etc.)… they should get no bankruptcy protection at all? Because it’s somehow their fault?
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This, while businesses routinely declare bankruptcy – destroying pensions, screwing consumers and employees as much as possible, etc. etc. etc.
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Very few people abused the old bankcruptcy system. Despite your utopian views, credit cards in this day and age have become very important and almost necessary. Can one live without them? Sort of… but, to put it this way, I still don’t have all my college books a month into the semester because my debit card was lost and has taken 2 weeks to replace and got rid of my credit card about a year ago because I ddin’t think I needed it. I just don’t carry that kind cash and, with classes and rehearsals, etc., going to the bank is almost impossible most days. So, credit cards are a little more necessary than you’d be willing to admit – so necessary that I now have NO IDEA how I’m going to write a paper for the class that I don’t have the books to (all because I don’t have a credit card atm). Just because you can live without them doesn’t mean there aren’t people who need them more than you do. I can get by too, but it is a hardship. This episode has almost tempted to start carrying around my card again.
…..as to your personal situation, this seems like a mole hill mountain to me, but we all have to manage the best we can, good luck with your paper.
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BTW, one can use credit cards without accruing any debt. I use my credit card for almost everything and then pay it off at the end of the month. I get all of the protection and none of the finance charges. Also, I never said that people should not have bankruptcy protection, I said that credit card debt is not a good reason in itself to get behing the reform (notice I said health care expenses are a good reason) because credit card debt is voluntary. If that small family you describe has moderate debt because of home electronics and dinners out I don’t really feel that sorry for them. Financial discipline is required of us all. Now, if they accrued that debt in purchasing necessary items like groceries or medications I would say that yes, we should help these people, but not by allowing them to accrue interest bearing debt. Food stamps, subsidized health care, yes absolutely. I’m a very liberal person but I just can’t get behind a defense of credit card debt.
Why do you think bankruptcy protection should be based on what instrument is used to acquire loans? Credit cards are the easiest way for people to get loans. Large home electronics are currently sold with store financing, so they wouldn’t go on credit cards. If you default on those debts, they reclaim the home electronics. Same with mortgages and car loans. Studies show that something like half of people declaring bankruptcy are doing so primarily because of a large health care expense. Many of the rest of them are due to unemployment. Most people declaring bankruptcy have credit card debt because you can get credit card loans regardless of any other factors. Someone declaring bankruptcy without credit card debt would actually be very suspicious, because it would imply that they are declaring bankruptcy at their first opportunity, rather than trying to cover their monthly payments in whatever way they can until they are forced to give up.
…..that large home electronics are sold only with in store financing makes no sense. People buy this stuff with credit cards all the time. And your statement about people without credit cards who declare bankruptcy being suspicious is not even remotely accurate. I support assistance and I support bankruptcy. I do not support flagrant accrual of credit card debt for unnecessary purchases. Your point would make much more sense if in general credit card debt was accrued only after the unexpected financial difficulty for necessary purchases. That is not always the case. I would venture to guess that in many or most cases (and anecdotally my sister-in-law is a bankruptcy attorney so I’m fairly secure in this statement) people had already accrued a degree of debt that was much too risky before they got in trouble. And finally, the type of debt is important. A mortgage is secured debt, there is an appreciable asset that can be reclaimed in the event of inability to pay. Credit cards are unsecured and as such risky. Americans need to be weened off of foreign oil and unsecured debt!
Not many people choose to be laid off, certainly no one with incredible debt and few options to find an adaquate, new job quick.
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If people were paying their bills on time, quite frankly it’s their own business how they spend their own money. Is it foolish to charge more? Certainly, but for some they don’t have much of a choice. I certainly know that when my mom was a single mother of three, she had a decent amount of debt.. because when my 6’6″ brother needed a new pair of basketball shoes, she didn’t always have the money to buy them right away… and considering the fact that you can’t take out a loan for a pair of basketball sneakers, a credit card was her only real option – that, or telling her kid he couldn’t play basketball anymore. It’s easy to get all preachy when it comes to matters of debt, but it’s all a load of crap IF the family is actually paying their bills on time.
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If something sudden, unexpected or unavoidable happens to ruin their finances and suddenly they’re in trouble – it may be appropriate to give them some help. The family could have had NO DEBT and still be in trouble from a job loss – after all, a credit card in that situation could be the difference between starving and eating, especially when not everyone can get unemployment (ask my stepmom when her travel agency went under because of 9/11 and the internet). Debt happens fast in those situations, even if none of it existed before.
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People shouldn’t – and didn’t – get off scott free when they filed for bankruptcy. Most of the money had to be paid back – and by all means, if people were buying plasma TV, confiscate them and give the company as much of their money back as possible. However, people should be entitled to at least the same protections that businesses get when they declare for bankrupcty, and probably more. Right now, CEOs can declare bankruptcy as a matter of convienance – it becomes a smart business decision for them and they aren’t held accountable to all the labor deals they made in good conscience, etc. Yet, people are now screwed – even if they were forced to declare bankruptcy for perfectly legitimate reasons, like sickness in the family, job losses, etc.
Actually, with the current state of credit records, everyone should have a credit card. Kind of like how everyone in Massachusetts should get a driver’s license even if they aren’t going to drive for the next few years (so that they can have a good driving record for insurance), everyone should have a credit card if they ever plan to get a loan. Loans are practically necessary if you plan to buy a car or a house ever. Credit checks are becoming routine for renting apartments and getting jobs. Having several credit cards with no late payments (credit scores mostly don’t factor in whether you are making payments or not, just whether you are missing any or not) is the easiest way to improve your credit score. You want to get a credit card as soon as you turn 18, because you want to have a 7-year credit histoy as soon as you can. Whether you use it or not is up to you. But you should at least have one.
a family forced into bankruptcy by a health care crisis pays for their utilities? Groceries? Doctor’s visits?
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Clamshells?
…I think that they all go down to the beach and pick up clamshells to pay their light bill. Why don’t you?
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How many of those families were already carrying 10 or 20 thousand dollars worth of luxury debt before the health crisis? I don’t think you need to forgive people their avoidable, voluntary debts to offset a healthcare crisis. I would happily support legislation that allows people to freeze and apply for assistance or protection from crushing health care debt or better yet, accessible, affordable, quality health care for everyone.
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People in this country spend more than they have at an alarming rate, far too much to try to excuse it as a means to deal with health care costs. Sorry, I don’t buy it.
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research the primary causes of personal bankruptcy in America. Hint: You might want to use “Harvard” in your Google search.
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Then, shattered shards of your right-wing frame in hand, return prepared to defend your argument that personal bankruptcy should, in fact, be abolished in order to privilege one predatory form of revolving unsecured debt.
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You might also want to make a brief pit stop to revisit personal income and inflation statistics over the past few years.
right-wing about me or my point of view. I know all about personal bankruptcy and predatory lending as well as the issues of personal income and cost of living. I also never said that personal bankruptcy should be abolished. I did not support the change in the bankruptcy laws because I felt it was throwing the baby out with the bath water. That being said, Americans rely to heavily on unsecured revolving credit to feed their sense of entitlement. I didn’t have credit card debt when I made 22,000.00/year and I don’t have it now that I make significantly more. Personal accountability should be part of the equation. There is a reasonable middle ground where people can be protected without being encouraged to use credit cards improperly.
though you don’t seem to realize it. You’ve adopted their frame hook, line and sinker.
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The leading cause of personal bankruptcy isn’t buying too many plasma TVs. It’s healthcare crises–largely among families that already had insurance. Yet you’re painting them as the equivalent of Cadillac-driving welfare queens. Forget the data; I can tell you a really good story.
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And yes, you do advocate abolishing bankruptcy, because you argue for exempting credit card debt from discharge. Money is fungible; a dollar doesn’t care if you owe it to NStar or JPMorgan Chase. If you can’t discharge the debt, you can’t get out of Chapter 7 bankruptcy. Period. You would have people’s futures hinge entirely on which card they happen to have pulled out of their wallet–the HELOC card from the mortgage company or the credit card from B of A.
….I did not advocate exempting credit card debt from discharge. I adovated making health care affordable for everyone so that would no longer be part of the equation. That is about all I have actually adovocated thus far. If I were to advocate a position, it would be one of complete reform both of lending practices and the bankruptcy code and I would advocate for a system that discharges debt either in total or in part based on several criteria that I am not going to go into here. If it were up to me some people would have a more difficult time discharging their debts than others but that is appropriate. Yes, most personal bankruptcy is a result of healthcare hardship. At the same time there is a reliance on consumer debt in this country that is reaching catrasrophic proportions. And there was, despite the minority of the phenomenon, not insignificant misuse of personal bankruptcy. It is possible to be moderate in the approach in a way that protects people without encouraging irresponsible behavior. I am not painting anyone in anyway, I am advocating for a moderate system that is by no realistic definition right-wing.
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with most of what you say you advocate in this post.
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Unfortunately, it rather baldly contradicts what you say here and here.
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Right-wing language was specifically designed to advance the right-wing agenda; liberals adopt it at their peril.
…was specifically in regard to what should be the leading reason to reform bankruptcy. My point was that if one want to advocate for bankruptcy reform perhaps one should lead with healthcare and not credit card debt as the basis for the argument. I specifically mention healthcare. I concede that my point is less than clear but I think it is far from a bald contradiction. The second link is not active so I can’t comment.
But even after the 2005 Bankruptcy act, revolving credit can still be wiped away in bankruptcy. In Chapter 7, pretty much all debt is debt (not student loans, not taxes).
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The problem the advocacy groups have is with the means test that doesn’t allow Chapter 7 so long as the family has current earnings of:
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Family of one: $49,930
Family of two: $58,479
Family of three: $72,749
Family of four: $85,420
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Now maybe you can argue that those levels are too low.
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But, in fairness, if someone has the earnings capacity to earn say (arbitrarily) $150K per year, then why (as the old law was written) as a matter of fairness and policy should the judge simply wipe the debt away?
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I’m sure Anthony will go straight to liberal hell for basically agreeing with me, and me with him.
…we would find a devil somewhere in the details, but I think we can agree that we both believe personal responsibility should be a consideration in bankruptcy law.
which is almost always a sign of partisan hackery, btw. when you can’t answer the question, make up a new one. Suddenly, that family was buying plasma TVs now before the health care crisis…
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Here’s a scenario. 18 year old sick in the hospital for 6 months, needs a transplant surgery. Doctors give him 13% chance of survival. While he has insurance, both parents stay out of work to be with him in what could very well be the last moments of his life. Suddenly, they’re not earning the money they should be. Should they be penalized for spending the last few potential weeks or months they have left with their son? They should have let him die alone?
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The scenario above doesn’t exactly fit my life; I adapted it to fit what could have easily been any family. My brother did indeed have a 13% chance of survival and needd (and got) a transplant. Luckily, what he needed transplanted (a heart valve) could come from a pig, however. So, he didn’t have to wait months and months for a transplant – in which case my parents would have had to take a leave of absense. I don’t know if my father would have been entitled to any kinds of protection in that case, but my step mother – a small business owner – had almost no protections. If she didn’t work, she didn’t get paid. THere was no sick leave, no unemployment, etc. My brother was in the hospoital for 6 months – and even after the transplant, they didn’t know if he would make it or not for a long time yet.
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Luckily everything turned out okay, but change a few things around and the whole family could have been screwed. Despite the fact my dad had medical insurance, that insurance wouldn’t have paid the mortgage if he couldn’t work. It wouldn’t have put food on the table for my sister, who was a baby at the time. It wouldn’t have paid for the car or any home/auto insurance. He very easily could have been put in the position where he had to declare bankruptcy, despite the fact that a) he wasn’t sick and b) didn’t buy plasma tvs.
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Scenarios like that are routine: the child who gets a rare brain tumor. A divorce that brings both sides of the table to financial ruin, as legal fees can quickly run into the tens of thousands like no one’s business. The point isn’t that people should get away scott free – it’s that certain life factors have to be taken into account to determine whether any (and how much, if any) of that debt should be forgiven. I’d be much more likely to want to help a family out struggling with some extreneous situation than the plasma-buying idiots, but the plasma-buying idiots are few and far between – yet the Bankruptcy Bill screwed the honest, hardworking, already-dealing-with-enough-shit families too.
…at your partisan hackery comment. While I am by no means the most prolific person on this board I am fairly easiy identifiable as a very liberal person. Because I happen to have a more moderate position that you on this one subject is no reason to start throwing names aroud.
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And moreover, I answered your question. You said the family had moderate credit card debt and I said how I felt about that, particularly if the debt was related to unnecessary spending.
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I also have family experience with unexpected illness. My father got cancer. He didn’t work for a year. Then he died. My mother provided the health care insurance so she had to continue to work. Fortunately my family is responsible financially (and for the record by no means rich) so my mother was able to cut down her hours at work to the minimum necessary to maintain insurance and maximize the time she could spend with my dad. Because I learned responsible spending habits and not in debt I was in a position to take a leave of absense from work to care for my family at this most difficult time. We were stretched to the limit, but got through it fine because we were prepared to handle it.
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I have stated now explicity several times that I believe medical expenses should ruin no one but that consumer debt forgiveness is not the best or most efficient approach. I can’t say it more plainly than I already have.
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And finally, the plasma buying idiots are not few and far between. America is swimming in consumer debt and we as a population have no savings. I know that there are real issues that need to be addressed and that people sometimes need help, but Americans are, generally speaking, financially irresponsible and that is also a problem that needs to be addressed. It may already be too late.
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I just said that ignoring the question or point and changing the rules is an example of it, not that you are a political hack. Furthermore, I didn’t call you a liberal or a conservative. The point you didn’t answer had nothing to do with my words, but reply above your post in question.
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The fact that your family was able to cope with a difficult situation doesn’t mean that everyone family can. Let me reiterate that: just because you could do something, doesn’t mean that everyone could. Circumstances are always different.
….but:
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i didn’t label you a hack or con/lib I just said that ignoring the question or point and changing the rules is an example of it
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But here is what you wrote:
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you ignored the question which is almost always a sign of partisan hackery, btw. when you can’t answer the question, make up a new one
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Then I said:
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I take umbrage at your partisan hackery comment
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So, in this regard I did not alter or facially misinterpret your words. I did make an inference as to what you meant by partisan. If I was wrong, okay, but your comment was still uncalled for. Umbrage still being taken.
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I answered your question. Perhaps you feel my answer was insufficient or not on point but I certainly did not ignore it.
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The fact that your family was able to cope with a difficult situation doesn’t mean that everyone family can. Let me reiterate that: just because you could do something, doesn’t mean that everyone could. Circumstances are always different.
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Not really sure what this statement is supposed to prove. Of course every circumstance is different but the law does not need to be overinclusive to adequaltely deal with these differences. I think the law should encourage personal responsibility while still properly protecting people.
“which is almost always a sign” =! me calling you a hack. It was meant as a warning sign, for your future reference. Your reply was on the verge, but not quite there yet.
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Furthermore, “partisan hackery” doesn’t equal calling you a liberal or a conservative hack. “Liberal” and “conservative” weren’t mentioned. That was intentional because both liberal and conservative hacks display the same traits and I didn’t know whether or not you were a conservative or a liberal who just happened to have an aweful position on the matter at hand.
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End game – you lose. Entire civil rights movements have emerged because people felt that way. I’m gay, but because I could technically marry a loveless opposite-sex marriage, I suppose the law didn’t need to be “overinclusive” to allow me my equal rights? Right?
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If you want to talk about umbrage, that little quote there is the epitome of what will cause me to take umbrage at a statement. Laws and policies should always be set up to be as inclusive as possible – not considering very real (and more frequent than you’ve admitted) problems would be anathema to what we all expect out of American Democracy.
Come on. This is NOT a civil rights issue and to conflate the two is, frankly, crass and opportunistic and you are coming dangerously close to mocking the marriage that my husband and I struggled to deserve. I agree that in civil rights issues of over and/or under inclusiveness merit heightened scrutiny (but for the record equal marriage cases have been decided with the lowest level of judicial scrutiny with both good and bad result),but that is simply not the case in the area of bankruptcy and banking regulation, per se. It would of course be possible for a bank to violate someone’s civil rights, but that is not what we are discussing. We are discussing bankruptcy regulation and whether it should be, in my estimation, unnecessarily over inclusive. It is not a civil rights issue. People do not have a right to incure debt at the expense of their creditors. The govt. does have a legitimate interest in protecting people from predatory practices, over burdening by health care costs and even to an extent from their own lack of financial sophistication and bankruptcy laws do that (and should, I believe, do more than they currently do) but there is nothing constitutionally violative about the govt. creating a bankruptcy code that seeks to avoid over inclusion, and moreover, not a hint of infringement upon civil liberties.
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And as far as the hackery comment goes, my umbrage is my own, however, assent is not required.
If Americans stopped spending so much, the entire world would go into a recession at least as bad as the great depression. The structural problems in the world economy are far greater than anything about Americans being willing to spend money that nobody else will spend. Why do you think all the cheap credit is available anyway? China and other emerging economies are lending money to America at any interest rate because they need Americans to spend or their economy will collapse. They don’t care if the loans are paid back, so the credit risk is irrelevant.
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We need to transition to socialism in the near future because we are approaching the limits of capitalism. Currently the transition is taking the form of loaning money to whoever is willing to spend it and then accept that they will declare bankruptcy instead of paying it back. This is inefficient to a far greater degree than any form of government handout could possibly be. It rewards people for being irresponsible and pushes the cost randomly around to whoever is bothering to save money. People living in poverty don’t get any help unless they are willing to take out huge loans they have no expectation of being able to pay back. A far better situation would be if we gave everyone a guarantee of at least a poverty level income, took care of health care, made it impossible to discharge debts, limited maximum interest rates, and required companies to accept slow payback of debt from people who can’t afford to pay it back right away (although we wouldn’t require them to extend more loans to anyone). This would remove legitimite reasons for declaring bankruptcy and would provide resources to people who most need them instead of people most willing to declare bankruptcy. But it won’t happen until we get the second half of the great depression and people understand the limits of capitalism. Which will be at least 5-10 years from now.
As I tried to make clear, the way the credit card companies have structured the agreements with merchants, the price of the fee is a part of all goods, regardless of whether you pay cash or credit.
This issue is very complex and would be extremely hard to change – though I’m not saying we shouldn’t try.
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I just think that if we want to restore a little balance in the consumer-credit card divide, we should focus on repealing the Bankruptcy Bill first. It’s far more black and white and potentially more devestating to people. Whereas the intercharge fees hurt a lot of people a little, the bankruptcy bill is a devestation laid upon a very great many people too.
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Credit card copmanies have been going through years of record profits, usually at the costumer’s expense. It’s time they pay their fair share toward society and not be able to rob the populace blind, especially those who can least afford it – who, coincidentally, are the people credit card companies most often target.
I pay no annual fee, and I pay in full each month. This means that the amount I charge each year is exactly the amount I pay each year. I’m “good” with money; my mental budget and gnucash eliminate any potential problems of overspending.
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When choosing between cash (which requires me to go to the ATM periodically, as I have no other reason to go to the bank) and credit card (which pays me 1% back — not a lot, but more than 0), why would I use cash?
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The only reason I can think of: privacy. I’m willing to sell the dollar value of my 7-11, Stop and Shop, and Landry’s Bicycle purchases for that 1% cash back.
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There is credit card competition — competition for customers, on the backs of the stores. As a customer, why wouldn’t I use a credit card?
Everyone, I am bowled over by the overwhelming response. I know credit cards are a nuisance or problem for a lot of us, and I thought I might tap into some pre-existing experiences and feelings — but wow, this was amazing. I’ve read through all your comments, even the ones that went off on other tangents.
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If I have one thing to leave you with today, it’s that this issue doesn’t need to threaten other agenda items, like the bankruptcy bill is one I saw mentioned. They are all part of the same fight, and the interchange issue fits nicely with the other work Dodd has done (for the record, I am not endorsing him, I actually lean toward Edwards or Obama now) on banking issues. When more happens, I hope Blue Mass Group will be there to help support those issues and put them in front of the media’s attention.
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So I will be back with more updates as they are relevant, and maybe I’ll even try to drop in on a conversation from time to time. I love reading Blue Mass Group, so I will definitely keep doing that.
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Thanks, everyone.
I am wondering how auto companies get away with saying “0% financing or xx hundred dollars cash back.” Um, if you are paying less by paying in cash, than the loan is not “0%.” Advertising like that should not be allowed.