Another Swipe Fee Battle Unfolding

by Bill Hardekopf

According to CNBC, there is an antitrust suit between five million retailers and Visa, MasterCard and 13 large banks, including Citi, Bank of America, Chase, Capital One, U.S. Bancorp and Wells Fargo. Retailers claim that banks and the payment systems have unfairly worked together to increase the amount of the interchange fee retailers pay on credit card transactions.

The amount that each retailer pays as a swipe fee varies widely but the industry average is approximately 2 percent. This antitrust suit could cut that figure by three-quarters down to 0.5 percent. That would be one more devastating revenue blow to the banks as well as Visa and MasterCard, leading to billions of dollars in lost income.

Last year, the Durbin amendment went into effect on October 1, cutting the interchange fee on debit card transactions from an average of 44 cents to no more than 21 cents (plus 0.05 percent of the transaction, with the possibility of an additional cent if banks comply with fraud prevention procedures). Banks tried to make up for this lost revenue by implementing a monthly debit card fee which led to consumer outrage. Banks eventually rescinded this monthly fee.

If the retailers win this antitrust suit, it could have have a significant impact on consumers:

• Banks will lose billions of dollars at a time when they have already suffered significant cutbacks in revenue. Whenever banks lose revenue in one area, they try to make up for it in another area and that always comes at the expense of the consumer. An increase in existing fees, the introduction of new fees, and an increase in the credit card interest rates are changes that could be pushed by banks.
  
  
• A significant decrease in credit card reward programs. The lucrative cash back and airline mile rewards will likely decline. Most banks eliminated debit card rewards when the Durbin amendment passed. The same could happen with credit card  programs if retailers win this suit.
  
  
• A likely decrease in attractive balance transfer offers. Currently, credit card issuers are offering 0 percent interest rates for extended periods of time in order to lure customers from their competitors. The Citi Platinum Select card offers 0 percent for 21 months; the Discover More card offers 0 percent for 18 months; and the Slate from Chase card offers 0 percent for 12 months with no balance transfer fee. If retailers win this antitrust suit, look for credit card issuers to scale back these balance transfer offers.
  
  
• On the positive side, a possible decrease in prices at store level. Retailers claimed the passage of the Durbin amendment could lead to a decrease in prices since they would no longer have to pay the high swipe fees on debit card transactions. It is difficult to see if this actually took place. However, retailers may face more pressure from consumer groups to cut prices if the interchange fee is also slashed on credit card purchases.

Bill Hardekopf is CEO of LowCards.com, a site that simplifies the confusion of shopping for credit cards. It is a free, independent website that helps consumers easily compare credit cards in a variety of categories such as lowest rates, rewards, rebates, balance transfers and lowest introductory rates. It also gives an unbiased ranking and review for each card.

The Surprising Things You Find

 

What's hiding under your clutter?

It's really the little things in life.  I recently went through approximately 3 metric tons of paper clutter that has accumulated over the past several years.  In among the gas receipts, utility bills, pay stubs, birthday cards, tax documents, and empty envelopes was a $10 gift card for Coldstone Creamery my principal had given me as a thank you for chaperoning the prom during my third year of teaching.

I was extraordinarily excited.  As J put it, it was like finding an ice cream sundae hanging out in the cushions of the couch.

Time: the invisable resource

Oops, I Did It Again

 

This blissful photograph of the city I can't get out of my head is courtesy of Daniel Schwen.

It is becoming increasingly clear to me that fasting and I do not get along.  I would be the one to tell Gandhi to go ahead and have a cookie.  I am the one telling the rabbi I feel faint at 8 am on Yom Kippur.   And I am the individual who put $545 on her credit card on day 23 of her "financial fast."

It's Seattle's fault.  Ever since J and I booked our tickets to visit that fair city in June, I've been having a wonderful time planning and reading and imagining our time there.  So when I read about the website airbnb.com in this Daily Beast article, I decided to look into it for our trip.  Airbnb connects travelers with hosts who are willing to rent out rooms, apartments, guest houses, futons and tree houses (that's really a category!).

Within moments of signing on, I found a lovingly restored Craftsman bungalow for just over $50 per night for the three of us.  We'd have a private room, get a chance to share the kitchen, and will make some new friends.  And there's a dog!

I contacted the home's owner to make sure she's okay with a rug rat, and her response was so warm and welcoming, I went ahead and booked the house. 

Of course, the cost of staying with our new friends will be a great deal cheaper than staying in a hotel for our 9 day stay, even if you don't factor in our ability to cook in our Seattle home away from home.  So overall it was a frugal decision to book our stay there.  (Can you hear the rationalization?  Because I certainly can).  I had to "borrow" money from another fund to pay for the booking, since the tickets to Seattle wiped out the vacation fund, but we'll certainly be able to pay ourselves back long before the trip.

It's become clear, however, that my "Jump on that price, woman!" reaction is much stronger than my ability to fast.

We have one more week of fasting.  My $40 food budget is in tatters.  I've officially spent money frivolously by booking a vacation rental much farther in advance than necessary.  We ate a shame pizza.  In terms of straight fasting, I'm not sure this month can be called a success.  But, there is good news.  We have been much more mindful about our spending, checking with each other before each purchase and making certain that we would immediately use anything we did buy.  And that mindfulness means we will be able to pay off our credit card at the end of the month.   Since that was our entire reason behind this exercise, I'd call it a pretty productive month.

Look out Seattle!

Gardening fever

 Got the gardening fever yet? You know, when you start staring out the window or walking around the back yard or garden, silently willing things to start turning green? When the seed catalogs stay on the table days on end and the seed stash is sorted and resorted...

Not everyone does, I know, but I get gardening fever along this time of year every year. Every garden is going to be better than the garden last year.

It's almost time to start seeds indoors in much of the nation and time to start seeds outdoors in other areas. I can hardly wait! It has something to do with being frugal and something to do with being self sufficient and something to do with being a country girl at heart.

I love to dig into the soil in the spring and see it turn over, rich and moist and just waiting to give life to sleeping seeds. It's a miracle, no matter what science says about it.

Want to plan a garden?  
Methods, money savers, food preservation and more
Farmer's markets