Skip to comments.Debit-Fee Cap Has Nasty Side Effect
Posted on 12/09/2011 2:43:16 PM PST by throwback
Jason Scherr had a lot on his mind the day after he opened his fifth Think Coffee shop in Manhattan last week. The fan was blowing too hard, the classical music was playing a little too loudlyand he was trying to figure out how to get more customers to pay with cash.
A new law that was supposed to reduce costs for merchants that accept debit cards has instead sent Mr. Scherr's monthly processing bills much higher and forced him to reassess the way he does business.
"My choice is to raise prices, discount for cash or get an ATM," says Mr. Scherr, a lawyer who has been in the coffee-shop business for more than a decade.
Just two months after one of the most controversial parts of the Dodd-Frank financial-overhaul law was enacted, some merchants and consumers are starting to pay the price.
Many business owners who sell low-priced goods like coffee and candy bars now are paying higher ratesnot lowerwhen their customers use debit cards for transactions that are less than roughly $10.
That is because credit-card companies used to give merchants discounts on debit-card fees they pay on small transactions. But the Dodd-Frank Act placed an overall cap on the fees, and the banking industry has responded by eliminating the discounts.
"There will be some unhappy parties, as there always is when the government gets in the way of the free-market system," says Chris McWilton, president of U.S. markets for MasterCard Inc. He said the company decided that it couldn't sustain the discounts under the new rate model because the old rates had essentially subsidized the small-ticket discounts.
(Excerpt) Read more at online.wsj.com ...
And, the government screws up again.
And, the marketplace responds in kind.
The marketplace will always win.
Yes, eventually. But, it can go on for decades, as in the old Soviet Union, China, and Cuba. In the meantime, their are tens, if not hundreds of millions of casualties.
And Chris Dodd is a high-priced lobbyist for Hollywood, and Barney Frank will soon be a “Distinguished Chair” at the Harvard Kennedy School of Government. Whereas, in a just world, both of them would be breaking rocks on a prison chain gang.
Our local coffee shop is and always has been cash only. They do run a reverse tab system where you can pay twenty or thirty bucks up front, and they’ll keep track for you. They keep your name taped to the bagel case next to the register with a running balance....
I think this is one side effect that is positive - it reduces the data available for tracing a debit cards whereabouts.
A kid at the BBQ joint had to do that with me the other day. Manager assistance was required.