Let consumers decide whether to pay debit fees

The battle between banks and retailers over debit fee charges roiled the
Senate this week with the banks losing the first round of the battle.

Not a surprising outcome given that since the Dodd-Frank financial
services takeover bill passed last year, our nation’s big banks have
effectively become nothing more than federal government vassals rather
than private institutions. Naturally, the Senate feels it is their right
to set the various fees that they can charge.

Last year’s Dodd-Frank bank-funded bailout program requires that big financial institutions shove money into a special government fund to cover these same banks when they run out of money. Rather than allowing them to fail, Dodd-Frank instead forces banks to collect fees from consumers so when banks lose money on bad loans to help congressionally favored constituencies, Congress doesn’t have to bail them out using taxpayer money.

Instead, banks use money collected from consumers, saving our elected representatives the embarrassment of having to admit that their own failed policies of forcing banks to loan to people who have neither the capacity nor desire to pay the loan back are the reason for bank failures.

Even though my personal dealings with a bank named after President Lincoln’s Treasury Secretary would lead me to write an extremely negative column on the banking industry as a whole, in the debit debate, they are actually correct.

As a consumer, I choose to bank with Bank of America largely because they have ATM machines and branches that are convenient to me. I choose not to access my money using ATM machines that are not within the BoA system, because I am cheap, and it is usurious to charge $3 to get $20, unless you are getting the money from a guy named Vinnie down by the docks.

Now, as debit and credit card usage is becoming the norm rather than paying with cash, retailers face these fees.

The solution for retailers who are paying 2 or 3 percent to Visa, Master Card, Discover or any bank for credit or debit card fees is simple — give your customers an instant 2 percent rebate if they pay cash.

When I use my Discover card, I get 1 percent cash back. The retailer pays a 3 percent premium to Discover when the card is used at their establishment. Incentivize me, the consumer, to pay cash, and I will.

The retailer makes more money, and the consumer shares in that savings.

With computers serving as cash registers today, you wouldn’t even have to rely on the U.S. education system to deliver you employees who could figure out that one percent of one dollar is one cent. It could print right out on the receipt, and the change would spit right out of the machine without relying on any young “World of Warcraft”-addled minds to have to figure it out.

To me, the biggest disappointment in the debate over debit fees is that many of the very people who should know better looked to Congress for a mandated solution rather than letting the free market work.

Let the consumer decide if paying an extra 3 percent for the convenience of using a debit or credit card is worth it. What a concept!

Rick Manning is the communications director of Americans for Limited Government.