|by Jason Steele|
Yesterday, I shared with you the grim news of the Durbin Amendment and how it will effect everyone every time they pay for anything.
It has been said that politics makes for strange bedfellows. Last year, I spent much of my time and effort supporting the CARD Act, which was strongly opposed by the banks. The banks loved to pretend that the CARD Act was going to be bad for consumers, while I contended that they should stick to pronouncing how the CARD Act will effect them, and leave consumer advocates to represent consumers. To do otherwise, was paternalistic and disingenous.
How Times Have Changed
Now, in light of the Durbin Amendment, I cna forsee a rare alignment of the interests between banks and consumers. I have already pointed out how consumers will be screwed by this bill. The bill unquestionably shifts transaction costs to consumers while destroying price transparency in everyday purchases.
I am will to risk of being paternalistic and disingenuous myself when it comes to describing the effects of the Durbin Amendment on banks, as unlike the CARD Act debate, my interests as a consumer advocate do not conflict with the banks and the credit card companies.
Banks And Credit Card Companies Are Going To Be In Big Trouble
When the day comes when I will be faced with a substantially lower price for using cash or check, I am going to have a real hard time justifying pulling my credit card out of my wallet. It is very easy to imagine merchants raising the credit card surcharge or cash discount (they are essentially the same thing) far beyond their interchange fees and very close to my present reward value. This will be compounded by the fact that as fewer consumers use credit cards for daily transactions, credit card companies will earn less in interchange fees. Furthermore, the Durbin Amendment will have the otherwise reasonable effect of lowering interchange fees across the board.
I can see no other outcome to this disruption of the status quo than a massive decline in interchange (swipe) fees as consumer flock away from credit cards, especially deadbeats. You might be thinking; “Jason is a real credit card guru, but the average card holder won’t really notice a couple percent here or there and change their behavior.” I am afraid this is not so. Check out the comments to this article about the Durbin Amendment in the Consumerist;
Stores won’t lower their prices, this is profit you won’t notice. Instead, they’ll charge a credit card fee, and prices will go up!
This is a consumer-unfriendly move.
I’m sure that all retailers will immediately lower their prices because of the reduction of swipe fees. …oh wait, no they won’t.”>I’m sure that all retailers will immediately lower their prices because of the reduction of swipe fees.
…oh wait, no they won’t.
I currently have 2 motivations for using my CC:
1. Easy to track expenses without the receipts.
2. Cash back. (I don’t every carry a balance)
If the cash back goes away and stores offer a cash discount due to this bill, I will stop using my CC for most purchases…