Sunday, May 22, 2011

The Battle Over Credit/Debit Card Swipe Fees

The path between your credit card transaction at your favorite store and the bank or credit card issuer is significantly more complex than most people think. VISA and MASTERCARD , for example, as business entities that you do business with directly do not really exist. Seriously, try to find a VISA or MASTERCARD Office. You always end up at an issuing bank. That's because VISA, MASTERCARD, AMEX DISCOVER are really service providers. They supply the network that processes your transaction. There are a multiplicity of hands in your credit card transaction all taking a penny here, a few cents there all referred to as the "discount rate". When you make a one hundred dollar purchase at store and use your debit or credit card if the merchant has a 5% discount rate he only gets $95. The five bucks is divided among a number of service providers from the regional clearing house, card issuer and others. Think about the number of credit/debit card purchases daily and you begin to get a picture of the enormous amounts of money being funneled off to the credit card industry. They are like a leech on the money flow.

In December, the Federal Reserve issued a rule that would cap the fee at 12 cents per transaction. The new rule was added to the reform bill as an amendment by Senate Majority Whip Dick Durbin (D-Ill.) Thus begun an intense battle between the banks, credit card issuers, service providers and the retail industry who would like to hold on to this money instead of giving it to the banks. Sen. Jon Tester (D-Mont.) has proposed legislation that would delay its implementation by two years. Want to guess where his campaign contributions will be coming from?
The credit card issuers, banks and service provides have gotten fat on this unregulated flow of money and are now fighting to hang on to the only thing better than an oil well when it comes to making easy money. The retail industry wants to keep the discount fees to "lower consumer costs". Don't hold your breath on that one. A better bet is any savings they reap will go right to the bottom line as profit. Finally, the banks are threatening to raise fees and every other charge including card interest rate if they loose this revenue flow.
Most likely outcome if the bill passes: Banks will use it as an excuse to raise fees on small account holders, retailers will keep the money, prices will not go down and card issuing may become more restrictive.

See a win in there for the consumer? Me neither.


Wednesday, May 18, 2011

Debt Ceiling and Disaster

Dr. E. Eugene Webb

You are hearing a lot of noise about the US Debt ceiling. Most of the politicians and financial people are predicting disaster if Congress doesn't vote to raise the debt limit. Those crying the loudest are social reformers who think we can spend our way out of the current mess, and the financial/investment people who live off the interest paid on the US debt while contributing nothing in return. But recently some new voices are starting to be heard. They are pointing out that the US will not default on the debt but start moving funds around to make its debt payments. The real problem is all of those political sacred cows that won't be funded while we pay off our obligations. The liberal left, who never saw a dollar that they didn't want to spend two of, are concerned that their source of funding, borrowed money, for social boondoggles will dry up. Actually, not raising the debt limit might be good for the government. It would cause a refocusing of priorities and start to bring some reason to government spending. We've tried everything else. Its time to cut up the Federal Government credit card. Let's take a shot at fiscal responsibility. The global economy will not fail regardless of what all those mournful faces on the money talk shows say.



Sunday, April 24, 2011

Politicians, Public Servants, Religious Leaders and Easter

Dr. E. Eugene Webb

A little over 2,011 years ago a guy who many of us believe arrived on this earth via a miraculous birth began speaking out to the people. At the time he was just about 30 years old. At first dismissed by religious leaders as a flash in the pan, his popularity began to grow. For the next three years he would push the limits of civil and religious law. Soon, he was on the radar of not only the right wing religious leaders but also the politicians. His inner circle of twelve were not the most sophisticated of their time, but they had a charismatic feel about them.

As he moved about the countryside the number of his followers began to grow. The crowds were bigger and more fervent. The religious leaders were in a frenzy as he questioned their law and their motives. The political establishment, while reluctant to enter into what appeared to be a religious dispute, were becoming concerned. The people were uneasy and a revolt might threaten the political establishment. The religious leaders on the far right began to pressure the political elite for swift action. They wanted their old laws preserved and this perceived threat eliminated. The politicians handed the problem to a dutiful public servant who carefully reviewed the facts. Being politically correct, he found no reasons for pursuing the religious leader's desire of putting their problem to death. When the public servant offered to release him, the religious right flew into a rage chose instead a thief. The public servant, weary of the fray, released Jesus to the religious leaders who took it upon themselves to put him to death in a most insidious way. Then there were the circumstances of his resurrection. An empty tomb, reported sightings and resurgence of his movement and a promise to return.

For the next two millennia no single individual would have the effect on government, politics, religion and life itself as this one person. 2000 years later religious leaders still pressure for their way, politicians maneuver and public servants to often wash their hands of the problems. One can only image he must wonder if we have learned anything from Easter.