Monday, September 26, 2011

Debit Card Fees - Pigs at the Trough

If you have been reading the papers you may have noticed that the banks are about to raise "swipe fees" on Debit card purchases under $15. While this may appear to affect only the merchants involved, think again and you will find that this action affects almost everybody. Banks currently charge retailers about 1.55 percent of the purchase price, plus 4 cents for the smaller transactions. This means that when you buy a cup of coffee for $2, you are paying 7 cents. Under the new rules this will triple. This may not seem a lot to you as an individual, but think of the impact it will have on the smaller retailers. In an effort to remain competitive they will have to absorb these costs, or pass them on to you as a consumer. In the very worst case this would drive customers away from the smaller retailers, into the arms of the larger ones, who will be able to more readily absorb these additional fees.

I use my Debit Card for almost everything, rarely carrying cash. This means that my local fried chicken place, as well as grocery store, will make less profit per purchase from me than they did before. And that loss will be passed on to me by the merchant, while the banks continue to rape the very people who bailed them out recently. Alas, how soon they forget. Wait, they never cared to begin with!

I am now withdrawing enough cash each week from the bank to pay for my smaller purchases in cash, rather than using my Debit Card. Will it make any difference? I don't know. But sometimes you just have to take a chance that doing something is better than doing nothing. I look at it this way, if I take the money directly from the bank, and give it to my local mom and pop stores, the bank will have less money and the stores I shop at will have more, enabling them to keep prices down. If I'm wrong, nothing changes. If I'm right, probably nothing will change either. But I will feel a whole lot better. And that's priceless!

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