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Money Matters

Money Matters

Posted: Wednesday, October 26, 2011 7:01 pm
By: Bradley Barrett, Special to The Press

Last year, when Congress voted to change debit card rules, Sen. Richard Durbin of Illinois promoted the effort as a way to put money in consumers’ pockets. The campaign for the change, led by large retailers like Walmart, Target and Home Depot, was couched in populist tones as if they were protecting the consumer.
Now, just over one year later, debit card fees are the topic of the day. Congressional action took $8 billion out of one industry and handed it to another, and consumers were left holding the bag.
Banks, faced with this significant loss of revenue, are faced with covering the expenses of the highly popular debit card network.
Think back to the days of only a check or cash option for payment of goods and services.
As former Federal Reserve Gov. Mark Olson puts it, “The debit card is a technological marvel.” And that technology has required billions of investment dollars to develop and install.
The interchange capability required and requires complex legal arrangements to address issues involving clearing financial transactions through multiple systems, not only throughout the U.S. but throughout the world.
Nowadays, the transactions are so commonplace, it’s easy to take use of the debit card for granted; but real money was and is involved in keeping the system secure and functioning. So banks, as businesses, are faced with the task of covering the costs of the debit card system, and many have had to look to fees.
Consumers, if unhappy with their bank fees, have options. They can make payments by cash, check or credit card. Another option is shopping banks, as different banks have different cost structures.
In the meantime, have Walmart, Target, Home Depot and the other retailers benefiting from government price-fixing passed along these savings to consumers? Only consumers can answer that question.
Adages get old because they are often true. There is no free lunch. Convenience, security and technology all cost money. Congress basically gave retailers an $8 billion lunch and left consumers to pick up the tab.
“Money Matters” is a column written by Bradley L. Barrett, president of the Tennessee Bankers Association.

WCP 10.25.11

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