PLANK JULY 23, 2012
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If you happen to see an advertisement calling for repeal of something called “the Durbin amendment,” on the grounds that it provided an $8 billion windfall to retailers, don’t be misled into thinking the sponsor is some do-gooder consumer group. The sponsor (“The Electronic Payments Coalition”) is in fact a bunch of banks that don’t like new federally-imposed limits on “swipe fees” for retail transactions involving debit cards. Logically, swipe fees for debit cards should be a lot lower than swipe fees for credit cards, because when you use your credit card your bank is extending you credit, whereas when you use your debit card your bank is merely allowing you to spend money already sitting in your bank account. But before Sen. Dick Durbin, D.-Ill., inserted his fateful amendment into the Dodd-Frank financial reform bill, the fees were about the same. Consequently, retailers paid more than they should have to process debit-card transactions. This cost was passed on to you, dear reader, in the form of higher prices.
Now permissible swipe fees for debit transactions are much lower, and the banks are hopping mad about it (though a few have figured out alternative ways to charge you for spending your own money that may earn them even more cash). The larger story (which I told two years ago in Slate) is that for years banks have moved heaven and earth to make debit cards, which are supposed to be a thrift-minded alternative to credit cards, resemble credit cards, and to a surprising degree they’ve succeeded. If you’re a banker thrift is the enemy. Banks don’t want you to spend money that you have; they want you to spend money that you don’t have, so they can hit you with interest charges and/or fees. That’s why they had to be dragged kicking and screaming into arecent legal settlement allowing retailers to charge more for credit-card purchases than for other purchases.
None of this means banks are evil. But it does make them an untrustworthy source on this general subject.
6 comments
"None of this means banks are evil." Recent and not-so-recent history says otherwise.
- tmmats
July 23, 2012 at 3:47pm
"None of this means banks are evil." Recent and not-so-recent history says otherwise.
- tmmats
July 23, 2012 at 3:47pm
>If you happen to see an advertisement calling for repeal of something called "the Durbin amendment," on the grounds that it provided an $8 billion windfall to retailers, don't be misled into thinking the sponsor is some do-gooder consumer group. Where would one happen to see such an advertisement!? http://i.imgur.com/b2qcO.png
- CAinDC
July 23, 2012 at 4:13pm
The big banks are evil. This does not by itself it prove that proposition, but it's a fair exhibit to use at their indictment.
- IowaBeauty
July 23, 2012 at 4:15pm
I have a small retail business with a charge card terminal. Visa , Mastercard and the participating banks have been beating the hell out of us with ever increasing fees . We have no effective way to shop for clearing house providers because Visa /Master and the banks have the wholesale rates fixed . They were charging as much as 6 times their cost to process debit cards . The Durban amendment put of cap an these charges at about 2x . Finally some relief for us . We needed it. Of course , the Republicans marched lock step against help for us because the are there to service the banks as was said by Rep. Spencer Baucus . The banks and charge card providers have unlimited $$$ to fight anything they don't like . Let small and larger retailers get at least some relief from the oppression of the charge card industry.
- alanwilkov
July 23, 2012 at 5:06pm
Why aren't the Democrats touting the Durbin ammendment as support for small businesses as against the Republicans who lined up behind the big banks & credit card companies? Or are they and I've just missed it?
- s.trabka@frontier.com-old
July 23, 2012 at 9:26pm