I don't write a lot of diaries. Only when an issue really grabs me and I think it's something that progressives aren't paying enough attention to. The latest is credit card fees. It's not a new issue, I'll grant you that, but especially in light of the recent Senate Banking committee hearings on unfair practices in card fees, there's a real chance to punch through the mass unconsciousness and wake people up to the fact that these companies are screwing them over on a daily basis -- and they're doing it without anybody even knowing about it.
It all begins with those "rewards" cards. bonus air miles, hotel discounts, coupons, points, cash back, you know them. I don't use those cards myself and I don't think I ever would. I don't need the debt. But there is a much better reason for not using them -- because they represent the biggest, least-known wealth transfer from the poor to the rich since, well, maybe since the Bush tax cuts.
Keep reading...
This requires a litte bit of a banking lesson. Not much, I promise. The Wikipedia page on interchange fees gives a good background, but let me try to put this in plain English:
When you use a credit card either online or in person, your bank has to talk to the merchant's bank. Similar to ATM fees, this is not a costless transaction (although it is much cheaper than they let on). So think of this like an ATM fee that the store pays instead of you. But as we know, any business always passes on costs to its customers, and so those fees end up embedded in the cost of the goods we pay.
Now, if you're thinking ahead you may have already asked: Well, why don't they just offer a discount if you're using cash? Good point! I'm glad you asked. And I'll tell you why not: because in the thousand-plus page agreements that merchants have to sign before they can accept Visa or Mastercard. Also in that document: it's highly highly against the rules for merchants to tell customers about the interchange fee they pay.
Now, here's another important factoid: As I mentioned, those interchange fees are much higher than they need to be, and that's because the banks that control the Visa/MC use the money generated from them to pay for the rewards cards you can only get if you qualify, and you have to be worth something already to qualify.
So think about it: A person living on a fixed income, who uses cash to pay for most items, pays a small percentage of that interchange fee every time he or she buys everyday goods at any place that takes credit cards. The banks then take those fees and give them to people who certainly don't need it, but like it when their bank gives them free stuff. And who doesn't like free stuff?
Anyway, there is certainly more to say about it but that's a start. There's a whole lot more information about this at UnfairCreditCardFees.com. Full disclosure: I've done some advising for them on this issue, but I'm posting this because I think everybody here would find it interesting. And I hope it makes you mad enough to start telling people about.