Through the Nose or Teeth: Prepare to Pay

It’s ironic, really.

All of these new charges, which take effect tomorrow, are because of a new rule that limits the fees banks are allowed to charge merchants every time a customer pays using their debit card. This rule, known as the Durbin amendment, is named after its sponsor Senator Richard J. Durbin. The rule has been called “a crucial part of the Dodd-Frank financial overhaul”.

In reality, this financial overhaul is aimed not so much at the Banks as it is the consumer. Has it never occurred to Senators Chris Dodd, Barney Frank, and/or Dick Durbin that the merchants were already passing the current debit and credit card transaction fees onto the customer?

When you go to Target and buy that shirt that used to be $10 but is now $12… why do you suppose that is? When the price of cotton goes up Target doesn’t eat the cost. If Target has to pay more, so does the consumer. If the Banks are being forced to charge merchants less for debit card swipes the Banks (clearly) aren’t going to just eat that cost. They too will pass the cost onto the consumer.

For the record, Wells Fargo has estimated that the new rule will cost them upwards of $250 million in revenue every quarter.

From another article:

“Chase is now charging customers for a paper statement. It also, like many other banks, scrapped its debit card rewards program. And customers that Chase inherited from Washington Mutual no longer enjoy free checking accounts. The bank is also exploring a number of other fee increases, including for online banking, according to people with knowledge of the matter.”

Are you ready to pay for online banking?

Both Dodd and Frank have promised that this new rule will “end the ‘Too Big to Fail’ era”. My opinion? We should get rid of the FDIC; that governmental crutch that supports bad and risky banking practices. Without the FDIC a bank that attempts a risky loan, and then fails, has to pay the consequences. The bank alone ends up responsible for poor business practices. Maybe they end up bankrupt and a handful of people (dumb enough to keep their money in a bank with questionable practices) lose some of their money. The up-side is that if/when a bank without the FDIC’s “insurance program” fails… the rest of the country wouldn’t be burdened with paying off that bank’s enormous debt.

Harsh reality: that’s where the FDIC’s money comes from folks – you and me. And when the FDIC’s pockets are empty guess how they refill them? And when those pockets are empty AND a major bank has a massive financial failure… well, like usual, the American people will just have to pony up the cash.

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