published Thursday, October 6th, 2011

'Thank' Congress for new debit fees

Nobody particularly enjoys paying new or higher fees for anything. But when debit card users start having to pay monthly fees to use the cards, they should place the blame precisely where it belongs: on Congress. That's because Congress created the conditions that brought about the new fees.

Congress assumed that it was doing consumers a favor when it passed a bill that reduced roughly by half the amount that banks can charge merchants for debit card transactions -- so-called "swipe fees."

But this misguided attempt at price controls has backfired royally. Banks are anticipating losses of billions of dollars because of Congress' meddling. So to make up for those huge losses, many banks have resorted to imposing monthly fees for their customers to use their debit cards in the first place. The fees vary from bank to bank, but at some banks, they will amount to about $60 a year for regular users of debit cards.

In short, Congress did not "control prices" for consumers; it only shuffled those prices around.

Consumers are understandably upset about the monthly fees for using their debit cards. But the fault lies with Congress for meddling and attempting to set prices, instead of allowing the market to determine prices.

Will Washington ever learn that even its best-intended manipulation of the economy is no substitute for the "invisible hand" of the free market?

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conservative said...

No, they will never learn. They must be voted out. It may be too late though, for socialist thinking dominates our society. People refuse to read or listen to sound doctrine but rather seek those who appeal to their envious and covetous nature. Emotion will always trump truth in the mind of a liberal. The liberals who comment on these articles are some of the worst I have ever read. They will blame the banks just like they blame the banks for the mortgage crisis, the oil companies for gas prices and the insurance companies for higher rates when state and federal mandates are the causes. Ignorance is bliss.

October 6, 2011 at 8:11 a.m.
nucanuck said...

conservative,

You are watching the American house fall down around you in the 39th most unequal country in the world and you think the bottom 47% are the problem? There is less inequality in Russia, China, and Portugal than in the US.

You're so wrapped up in your socialism/liberal mumbo jumbo that you are missing what is really happening.

Do you really think that you can survive in a country where the middle class becomes too poor to be middle class?

October 6, 2011 at 10:12 a.m.

Banks anticipating losses of billions of dollars? Not really. What they're losing is the swipe fees they gouged out of merchants, but that's not a loss on their actual operation costs, that's just them being denied revenues.

Which I cry for about as much as I do them losing money from not being allowed to engage in robo-signing. But yes, there was money involved. It was buried in the price of the goods you, and everybody else purchased though, not out in the open.

That's the real kicker about this editorial How it neglects to note that the Free Market is now involved when it wasn't actually involved before. What? Really? Yes. Because now you can see what fee your financial institution charges you, upfront, and in clear terms, rather than it being buried in the price of goods you purchased and thus hidden. So now we do have a free market. You can go to a new financial institution if you don't like the terms your bank offers you. I recommend it, otherwise they'll have no incentive to improve their offerings.

So embrace the new free market you have! You were paying it anyway, now you have information and can make a choice, instead of paying without realizing it. Or worse yet, making others pay even if they engaged in cash transactions.

So yeah, it turns out that the Free Market doesn't offer Free Goods, it just offers you the chance to freely decide what you want, and Congress is aiding it, by making it transparent to you, the consumer of a service.

The rest of you...go find a better topic for your discussion.

October 6, 2011 at 10:46 a.m.
XGSBoss said...

Banks and the "invisible hand" have shown since the dawn of banks to not really benefit anyone but the banks. Remove regulation and the banks gouge, steamroll, suck dry, and make slaves out of anyone needing their services. Which is pretty much everybody. It's their nature.

Tell banks they are free to do whatever the "market" will bear and see who pays. Account holders (you) and businesses (which will pass it on to you). Invisible hand might work here and there, but for banks and finance, not so much.

October 6, 2011 at 11 a.m.

Opposing price gouging does not mean they have to work for free. Just that the charges were excessive. And yes, I do know of many cases where merchants did refuse such transactions for various reasons. Of course this applied even if my financial service provider wouldn't charge them excessive fees, because they weren't going to leave that decision up to the low-level employee at the register.

But as I said, the banks were gouging the merchants, not you. But the merchants wouldn't exactly let that happen to them, so they increased their prices, which means the fees the banks were charging was...transparent to who was really paying it. Or in other words, invisible.

I don't like invisible hands myself, I like seeing who is doing what. Now you know your bank is charging fees to you, so you can go to another one, perhaps the one you named, which does not charge those fees. If the fees weren't shown to you though, how would you know to change?

Deregulate the banks and pretty soon we'll end up dead ourselves. Well, maybe not dead, since they couldn't keep bleeding us, but we might as well be.

One other thing that you might want to consider about those electronic payments though, is that they're a good way for big brother to track you. So would you rather have the risk of being robbed of your relatively untraceable currency or tracked through the electronic system? Maybe you want to try that experiment, or you could look at the guys who were just taken to jail because they used somebody else's cards. There's a reason why many libertarians actually oppose electronic systems and want to go to bullion instead. For them, the convenience isn't worth it. Something to think about anyway.

October 6, 2011 at 12:05 p.m.

Oh, the law of unintended consequences? That applies to a lack of regulation too.

Your example of the phone companies tells me that. I could find as many abuses by the phone companies of today as I could from when AT&T was in charge. And there's still the problem of them still trying to monopolize everything anyway, just without being regulated. Without regulation to mandate interconnectivity, you can bet that the telecommunications companies would isolate their weaker competitors in order to strengthen themselves.

See while the large companies do use regulation for their benefit (Who do you think helps write the regulations anyway? Those lobbying dollars do not go to waste.), they'd use a lack of regulation too.

That's the problem of power inequality. Almost as bad as a lack of transparency.

That's what happens with price gouging too, when somebody decides to take advantage of a market in some way where they have captured it, or just exploited others such as by relying on a combination of fear and need. And no, it's not an invention of socialists, go check out the Code of Hammurabi. Human beings haven't invented new crimes, there's plenty of old ones. At least we're not putting people to death for it though!

Also, if you check the air travel prices, I think you'll find that they have risen faster than other prices over time. I don't know that deregulation helped. UPS and FedEx, well, actually I find it is usually cheaper and more reliable to ship through the post office, but even they are regulated for quite a number of things. For good reason, since I do not want them to transport volatiles, not at all.

But hey you know what? I'm not asking for price controls. All I'm saying is that I want the charges to be transparent, not subsumed into the costs, just visible to everybody. So we can make a free choice.

What's wrong with that?

October 6, 2011 at 2:45 p.m.
hambone said...

Lets see now, congress cut the swipe fees banks charge merchants in half so banks are charging debit card holders a $5 dollar fee.

If merchants pass the cut on to customers in the form of lower prices what is wrong with that.

$5 a month minus ( 1/2 swipe fee x no of times card is swiped)= what?

October 6, 2011 at 9:53 p.m.
hambone said...

OK, now I've done some research. Banks have been charging a average of $.44 a transaction. So the fee has been cut to $.22.

Say you use your debit card an average of 3 times a day. 3 x .22= .66 .66 x 30 days= $19.80 - $5= $14.80 savings

October 6, 2011 at 10:18 p.m.
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