Mar 30, 2011, Money-Rates Columnist, by Jim Sloan
“Chase last week was the first of the large commercial banks in the U.S. to reveal that it’s considering putting a $50 to $100 limit on how much you can buy with your Chase debit card, regardless of how much you have in your checking account or savings accounts.
Are debit card restrictions right around the corner?
Banks have been talking for months about how to recoup the profits that would be lost if the federal government limits the amount banks can charge merchants when a customer uses their debit card to make a purchase. Many banks have already instituted charges for the once-free checking account, but with Chase alone estimating that it could lose $1.3 billion a year from the debit card “swipe fees” the company is exploring other options.
According to the Associated Press, the idea of limiting debit card transactions is just one of the ideas being tossed around in Chase corporate offices. What typically happens with large commercial banks is that one will institute an unpopular new business practice–such as charging customers for their checking account or putting significant restrictions on savings accounts–and the rest of the banks quickly follow suit. It’s almost like the banks take turns being the poster child for new policies that inconvenience consumers and tap their wallets…”
“The Fed is scheduled to adopt those fees this summer, and the action seemed like a done deal until mid-February, when Federal Reserve Gov. Sarah Bloom Raskin told a House subcommittee that the fees might be changed or delayed.
The amendment has pitted big banks against big retailers, who thought they’d already won the battle when Durbin’s amendment passed. Retailers say the fees are onerous and cause prices to be increased for everyone–even people who don’t have savings accounts, a checking account or a debit card. Debit cards, according to AP, were used 38 billion times by American shoppers last year, and the banks raked in about $16 billion from the swipe fees. The swipe fees amount to between 1 and 2 percent of the purchase price, and the average swipe fee is about 44 cents.
The banks used to say that the swipe fees help them cover the costs of a free checking account. But now that many banks are charging for a checking account, the bankers have started saying that the swipe fees allow them to cover the cost of fraud, such as when someone uses your lost debit card to buy a big-screen television.
The upshot for consumers is this: You’ll either start carrying around a nice big wad of bills like a Mafia boss or you’ll go back to buying stuff with credit cards or checks. Credit cards are exempt from the proposed regulations.”
Pasted from <http://www.money-rates.com/news/cant-purchase-that-tv-or-iphone-your-debit-card-may-soon-be-the-reason.htm>
Hmm, an interesting article…
I hadn’t heard about this while watching the mainstream news media, but I do realize there is so much to news report that some stories just slip through. I did manage to catch the heart wrenching Casey Anthony story, then was warmed and reassured by William and Kate’s wedding; did you see Ophra’s last show?
Ok, lets consider the effects of a $50-$100 cap on DEBIT CARD purchases. If you have a family of four or five and weekly grocery bill of $200, a $100 cap would mean two shopping trips. Unless you buy the dry goods on the first trip through ChinaMart, then pick up the milk, yogurt, eggs, and frozen veggies on the second trip– ferry the lot home in 100F temps. If you are a monthly shopper, like so many are, you gotta make 4+ trips into the store or will have to shop more frequently. Yes, I know there are lots of combinations and permutations, ways to split a hair or hare and make it all come out, but why?
Lets put this in perspective and go back in time, back some 25,000 years to a tribe in north central Europe. It’s your lot in life and place in the tribe that you are a hunter-gatherer. You don’t chip stones into tools, you don’t make rope from grass or bark, you don’t decide how large game is cut and divided amongst the old, injured or ill, you don’t commune with the Sky Gods and you don’t say where the tribe moves to hunt. You are a rank and file ‘hunter-gatherer’, you are expected to go out every day with a basket and pick berries, dig roots and tubers and bring them back to the tribe in your trusty large basket. Meanwhile, the guys hunting that day catch birds, squirrels and occasionally something as large as a deer. Everyone moves their commodity back to the tribe in the parcel-weight sizes needed to get the job done in one trip.
Then one day, the lady or guy who communes with the Sky Gods says, that it is the wish of ‘Thunder’ that everyone may only move (bring home) their commodities, tubers, squirrel and deer meat, nuts, grain, skins etc in a volume 1/2 the size of what a person can normally carry. So, now the hunters and gatherers have to make 2 trips afield to bring home what they use to do in a single trip. Of course it is the bag-basket makers that are profiting from the change, they just so happen to have a supply of the appropriate ‘1/2 size bags and baskets’ available.
Day after day the hunter and gatherers go off into the forest to work, but the extra labor and time constraints imposed by the officially sanctioned new carrying procedure have slightly reduced the movement of commodities. Some workers can make the additional daily trip fit into their work-a-day schedule, a few can’t. Occasionally parts of a deer carcass are dragged away by a beast before it could be brought back to the tribe. Grains and berries not harvested because it rained during the multiple trips are just lost.
>—Jump back to the present—->>
If there were only one constraint in life, how easy it would all be. We all know that 25,000 years ago, as today, there were and are, all manner of industries and services, the military and industries involved with the military, a myriad of educators-science-religious-medical organizations, multiple levels of leadership, and those who attempt to divide the wealth equitably between us. In the olden days, as now, every organization, has received a message from ‘Thunder and Son’s’ that things must change a little (in their individual financial favor)… and then, as today, the result was and is, a lowering of the efficiency in the transaction of the business of the tribe.
At some point it doesn’t matter where the leadership moves the tribe, the built-in laws and regulations, inefficiencies and reduced capacity doom the tribe into eventual economic decline, equally undesireable cultural changes or both.