Most of the time, I try to stick to writing up the worst abuses in the generally corrupt realm of financial services, but it’s important not to overlook the nickel and diming. First, if done on a big enough scale, it adds up to lots of money, and the amounts at issue are so small that it isn’t worth the trouble to buck the system, even if the practice or the level of charges is extortionate. Second, in the case of Visa and Mastercard isn’t simply the abuse a cozy dupoly (and where is the Department of Justice, pray tell? In Australia, the government has been all over the credit card industry, although some of its measures appear to have backfired). This is an excessively high frictional cost on commerce. Now how come when any brings up Tobin taxes (small charges on every trade) as a way to pay for the bailout and discourage speculation, the financial services industry becomes utterly apoplectic. You can’t interfere in “free markets” (as if licensed and government backstopped capital markets casinos bear any resemblance to fantasized “free markets”). You’ll hurt liquidity (and who benefits from all this slushy liquidity? Higher transaction costs might make fund managers think twice before buying and selling. OMG, they might start acting like investors again! Can’t have that, now can we?). You’ll raise the cost of borrowing (please, this is a real stretch, the spreads on new issues, which is where funds are raised, are much bigger than in secondary trading or derivatives markets, where taxes like this would bite).
Yet here in our very midst, we have a Tobin tax equivalent on a very high proportion of retail trade, in that you can think of the rapacious Visa and Mastercharge charges for debit transactions (disclosure: I’ve done a bit of work in credit cards, and trust me, the charges are egregious) as having two components: the fee they’d be able to charge if they faced some competition, and the premium they extract by controlling the market and refusing to compete on price. In terms of its effect on commerce, this premium is worse than a Tobin tax. Remember, with a Tobin tax, the intent is to throw sand into the gears to dampen speculation. Here, no one is arguing that we should be increasing transaction costs across the board to discourage spending or lower the volume of transactions to merchants, yet it has the same effect.
If you think I am caviling about something trivial, consider this bit from today’s New York Times:
some merchants are infuriated by a separate, larger fee, called interchange, that Visa makes them pay
….each time a debit or credit card is swiped. The fees, roughly 1 to 3 percent of each purchase, are forwarded to the cardholder’s bank to cover costs and promote the issuance of more Visa cards…
Some merchants say there should be no interchange fees on debit purchases, because the money comes directly out of a checking account and does not include the risks and losses associated with credit cards. Regardless, merchants say they inevitably pass on that cost to consumers; the National Retail Federation says the interchange fees cost households an average of $427 in 2008.
Yves here. Now I am a Luddite, I refuse to own a signature debit card and carry only ATM cards (why would anyone carry a piece of plastic that provides direct, unlimited access to your checking account? Have you never had your wallet stolen?) The article details the ways Visa steers customers to simply swipe and sign, rather than punch in a PIN:
When you sign a debit card receipt at a large retailer, the store pays your bank an average of 75 cents for every $100 spent, more than twice as much as when you punch in a four-digit code.
The difference is so large that Costco will not allow you to sign for your debit purchase in its checkout lines. Wal-Mart and Home Depot steer customers to use a PIN, the debit card norm outside the United States.
Despite all this, signature debit cards dominate debit use in this country, accounting for 61 percent of all such transactions, even though PIN debit cards are less expensive and less vulnerable to fraud.
How this came to be is largely a result of a successful if controversial strategy hatched decades ago by Visa, the dominant payment network for credit and debit cards. It is an approach that has benefited Visa and the nation’s banks at the expense of merchants and, some argue, consumers.
Competition, of course, usually forces prices lower. But for payment networks like Visa and MasterCard, competition in the card business is more about winning over banks that actually issue the cards than consumers who use them. Visa and MasterCard set the fees that merchants must pay the cardholder’s bank. And higher fees mean higher profits for banks, even if it means that merchants shift the cost to consumers.
Yves again. So we see the same story here as elsewhere: the financial services industry successfully leeching as much as it can out of the real economy.
And take note of this part:
Merchants said they had no choice but to continue taking the debit cards, despite the higher fees, because Visa’s rules required them to honor its debit cards if they chose to accept Visa’s credit cards.
Yves again. I’m no lawyer, but this looks like a cut and dried case of tying, which is an anti-trust violation. Here is a basic outline:
Illegal tying is one of the most common antitrust claims…Tying arrangements are often considered per se illegal. The basic requirements that must be met for tying to be per se illegal are as follows:
1. There must be two separate products or services.
2. There must be a sale or an agreement to sell one product (or service) on the condition that the buyer purchase another product or service (or the buyer agrees not to purchase the product or service from another supplier).
3. The seller must have sufficient economic power with respect to the tying product to appreciably restrain free competition in the market for the tied product.
4. The tying arrangement must affect a “not insubstantial” amount of commerce.
Yves here. Sure looks like those conditions apply. But wait a sec, this matter was litigated, and a settlement was reached…..and the charges still look awfully rich. The result was NOT an end of the tying arrangement, merely the payment of fines, a reduction in fees, and only an end to the requirement that merchants who take credit cards be required to accept debit cards at credit card fee levels. Looks like the class action attorneys chose to max out the cash value of the settlement (on which their fees were based) at the expense of the back end arrangement.
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Why would parasites show mercy?
Good thing the majority of Americans are no longer qualified for credit lines. Bring back the cash economy and starve the real beast that takes 8-10% in sales tax.
And please, what bank wouldn’t guarantee the funds from fraud by debit? It’s not like it’s their money anyway! (FDIC/Fed/Etc..)
Most banks do state that they will give debit card use the same consumer fraud protections as credit card use…but they don’t have to (and as with most rules on your bank agreements, this can change with little notice to the consumer).
Debit is covered under Reg E and Credit under Reg Z.
So why do retailers not encourage customers to avoid using those cards by reducing the final bill price by the difference between using the cards and not using them?
I hope this is a coherent question (and itis not meant to be rhetorical)–I’m a little exhausted at the moment.
On a bit more practical note, how does any other industry function? It seems axiomatic that any business will try to attain or retain a monopoly (or the closest thing to it–Visa/Mastercard/Amex form an oligopoly of sorts). It wants this monopoly so that it can set prices and therefore maximize profitability. I understand why a consumer wouldn’t like this, but to be outraged over it is a bit of a stretch, I think. I’m not defending the practice so much as I am taking it as an inevitability in *any* industry.
Monopolists are price-gougers, so the US has a raft of anti-trust laws to curb their anti-competitive behavior. The story certainly creates the impression that those restraints are not working very well in the case of MasterCard and Visa.
My understanding is the credit card issuers put in their merchant agreement that the merchant cannot offer a cash discount. I think some gas station chains have negotiated exceptions.
Since credit card holder have larger average transaction sizes than cash customers, the credit card networks have leverage.
Umm per your coutance with GW see:
Income distribution is the other pillar of Kalecki’s efforts to build a business cycle theory. To do this, Kalecki assumes that the industries compete in imperfectly competitive markets, more particularly in oligopolistic markets where the firms set a mark-up on its variable average costs (raw materials, wages of employees on the shop floor that are supposed to be variable) in order to cover their overhead costs (salaries to senior management and administration) to obtain a certain amount of profit. The mark-up fixed by firms is higher or lower depending on the degree of monopoly, or the ease with which firms raise the price without seeing reduced the quantity demanded.
My personal favorite: The tragedy of investment is that it causes crisis because it is useful. Doubtless many people will consider this paradoxical. But it is not the theory which is paradoxical, but its subject –the capitalist economy.”
http://en.wikipedia.org/wiki/Micha%C5%82_Kalecki
Skippy…Yves you always are full of surprises. When credit becomes bad investment muhhahaha!
PS BG this has some nice points with regards to tiers of investment ie not all cows milk tastes nice or is good for ya.
@Claire asks “So why do retailers not encourage customers to avoid using those cards by reducing the final bill price by the difference between using the cards and not using them?”
———–
HA! Because it is illegal to do so under both Visa and MC rules.
I argued this with Visa HQ for over 6 months when certain gas stations in my area began advertising a cash price and a credit price. They can’t do that because the credit price would be considered a “surcharge”, as it is higher than the cash price.
If you search the word surcharge here:
http://www.usa.visa.com/download/business/accepting_visa/ops_risk_management/rules_for_visa_merchants.pdf
You’ll find this statement:
“always treat Visa transactions like any other transaction; that is, you may not impose any surcharge on a Visa transaction. You may, however, offer a discount for cash transactions, provided that the offer is clearly disclosed to customers and the cash price is presented as a discount from the standard price charged for all other forms of payment.
So bottom line, under Visa/MC rules, you can’t advertise separate prices for cash/credit BUT you can offer a discount for cash.
However, it appears that both Visa and MC turn a blind eye to independent gas stations that do advertise separate prices. Perhaps they would get more motivated to take action if a national chain tried it. What could they do? They could revoke the businesses ability to accept their CC, which would severely impact many businesses.
And Calif. also has a civil law that prohibits CC surcharges but they don’t enforce it as the Attorney Generals office has better things to attend to with their limited staff (that is what I was told when I spoke with them).
You’re misreading this. As written (and enforced, as I used to work for a merchant processor), you can publish that there is a discounted “cash” price, but you have to publish the “credit card” price as the normal price.
But for the businesses, why publish a cash price at all? If a consumer is willing to pay the credit card price for a cash transaction, why not accept the difference. In addition, V/MC offer slightly lower rates for gas station transactions, plus you don’t have to pay for extra staff to handle POS/pump transactions, or take the risk of “missing” cash, so this can be of benefit to the retailer.
@Fraud Guy said “You’re misreading this. As written (and enforced, as I used to work for a merchant processor), you can publish that there is a discounted “cash” price, but you have to publish the “credit card” price as the normal price.”
===========
I had extensive discussions with Visa executive staff on this issue.
Yes, as they say you ARE allowed to offer a discount for cash.
But you can;t advertise TWO prices (Credit price and Cash price). That would effectively be imposing a surcharge for credit.
What you can do is list the credit price and then offer say 2% discount for cash.
It’s been a few years, but at the merchant bank level, posting the cash price was allowed; they took action if the list price was surcharged for credit.
The government should simply issue a cash card. Simply a plastic replacement for paper cash. The majority of transactions are done via card for convenience rather than credit. Competition would restart on the credit front, as the credit would be disconnected from the delivery method.
But bob, government is the problem, not the solution!
We need less government, not more government!
Keep the government’s hands off my cash!!!!!
See, in the private sector, there is this thing called competition that makes everything better. You can see it quite clearly in the war between Visa and Mastercard — the competition has made it better for everyone…just look at all the commercials! How could we live in a world without: “For everything else there is Mastercard?” And I just love Billy Crudup’s voice. It’s silky…
So duopoly, schmuopoly…I don’t even know what that word means, Yves. Stop acting all “smart” and stuff.
Network externalities? Please…don’t confuse the issue with big, fancy ideas that are just more liberal elite, communist bias.
Keep the government’s hands off my cash!!!!!
You mean the currency being managed by the Evil Government now?
Do you get that there are massive costs to printing/distributing/destroying currency? that can be eliminated with electronic transactions?
Your position can be summarized as you would rather be fleeced by Visa/MC and support a relatively inefficient currency distribution system. Your ‘big evil government’ rantings are nonsense.
Uh, charlie, I think it’s called sarcasm. You need to tune up your sarcasm detector, as it’s clearly broken.
“The fees, roughly 1 to 3 percent of each purchase, are forwarded to the cardholder’s bank to cover costs and promote the issuance of more Visa cards…”
What load of #@#%. A lot of it is given in “reward programs” that locks people in to using their cards. This in *fact* means if you don’t use a card, you’re getting ripped off, since you’re have to pay the 1-3% jacked up price even in you don’t use a card, thus paying for somebody else’s “rewards”.
Want to fight back by not using a credit/debit card? You can’t. You’re just screwing yourself. This is the disgusting situation that this cartel has forced us into, and our congress does not give a damn about because they are mostly paid for.
After the “rewards”, most of the rest of it is pure profit for card issuers. Anybody that thinks it’s not incredibly profitable to be a card issuer needs to have their head examined. Why else would everybody be pushing them aggressively?
Unfortunately, just not using a credit card is only the start of what’s necessary.
More fundamentally, we need to buy less stuff.
A lot less stuff.
We need to relocalize our economies.
Only that can truly strike a blow against the racket and take us toward some level of freedom, so long as the system still exists.
It’s true that merchants say they have to inflate prices to cover the costs of fees, so it might not seem worth it to use cash. In the short term, that might be the case, but it’s the only way to reduce the fees going to the card issuers and the banks. Remember that when you use cash the small extra amount is going to the merchant, not to the bank. If you want to reduce the power of VISA, you have to hit them in the bottom line, and that means not giving them fees, and that means not using the cards.
If you can’t wean yourself from the cards because of the tiny rewards, then you’re either using your cards WAY too much, or you’re extremely weak-willed. You don’t like the way the issuers operate but you can’t give up the little perks? Then you deserve to be a slave.
In addition, Visa and MasterCard introduced a new fee tier for reward cards a few years ago, so that merchants who accept their cards have to pay more for the privelege of subsidizing rewards to “high-value” customers who use those cards.
Or basically what American Express has been doing for years.
And unlike the debit/credit settlement (where you can opt out of taking one or the other, if you choose), you can’t opt out of accepting rewards cards.
I don’t really understand the way US debit cards work – they don’t seem to offer any of the benefits that UK ones have, and lots of disadvantages. Still, interchange fees are a problem here as well, and in fact the Office of Fair Trading preliminarily found them anti-competitive a while back (after an unbelievably long investigation which is still going on after nearly ten years). UK retailers don’t advertise separate prices, but usually there is a minimum spend (£5 or £10), below which there will be a fixed surcharge.
Of course the US justice department won’t go after VISA/Mastercard for their blatantly anticompetitive behaviour. They are too busy grandstanding and going after the likes of Intel and other real companies that actually provide real value to consumers.
Regarding one’s liabilities with Debit cards: my credit union told me that my Visa Combo card, which can be used as either a credit or debit card, restricts my liability for unauthorized use in the same way a credit card does, i.e…to $50.00. Can anyone confirm this? I think it would be easy for a sophisticated thief to figure out a four digit pin number.
Jim,
Reading Reg E and Z will explain the limits of either type of card as to your liability.
Basically, on debit (from http://ecfr.gpoaccess.gov):
“(1) Timely notice given. If the consumer notifies the financial institution within two business days after learning of the loss or theft of the access device, the consumer’s liability shall not exceed the lesser of $50 or the amount of unauthorized transfers that occur before notice to the financial institution.
(2) Timely notice not given. If the consumer fails to notify the financial institution within two business days after learning of the loss or theft of the access device, the consumer’s liability shall not exceed the lesser of $500 or the sum of:
(i) $50 or the amount of unauthorized transfers that occur within the two business days, whichever is less; and
(ii) The amount of unauthorized transfers that occur after the close of two business days and before notice to the institution, provided the institution establishes that these transfers would not have occurred had the consumer notified the institution within that two-day period.
(3) Periodic statement; timely notice not given. A consumer must report an unauthorized electronic fund transfer that appears on a periodic statement within 60 days of the financial institution’s transmittal of the statement to avoid liability for subsequent transfers. If the consumer fails to do so, the consumer’s liability shall not exceed the amount of the unauthorized transfers that occur after the close of the 60 days and before notice to the institution, and that the institution establishes would not have occurred had the consumer notified the institution within the 60-day period. When an access device is involved in the unauthorized transfer, the consumer may be liable for other amounts set forth in paragraphs (b)(1) or (b)(2) of this section, as applicable.”
However, “[i]f state law or an agreement between the consumer and the financial institution imposes less liability than is provided by this section, the consumer’s liability shall not exceed the amount imposed under the state law or agreement.”
So if your credit union says that they limit liability to $50, make sure it is in your agreement, that they don’t change that agreement, and you are covered; otherwise, the limits above apply.
Jim,
I am not an expert, but the fact that it is a “combo” card must put it under credit card rules as far as your liability in the case of theft or fraud is concerned. My objection is to the debit signature cards (as opposed to an ATM card, which requires the use of a PIN for a transaction to be completed).
Jim – repeat failed pins should trigger the credit card company’s fraud alerts as well. I’ve been pleasantly surprised by how well they work. Visa stopped two $4k fraudulent charges on my card and called me recently, as far as I can tell because it was the wrong time of day and probably because of the merchant account as well.
Credit cards are the worst and most criminal part of this entire financial scamindustry. I for one don’t carry a credit card anymore — jyst a few debit cards I use rarely when I rent cars or a hotel room or pay online. The rest of my life is cash based, and I love it that way.
But these criminals deserve a lesson. I hope as this crisis deepens, more and more people pull a MOWA (max out, walk away) on these Vusa/MC swindlers. The idea is to reverse the transfer of wealth back to the people, and to also run ghem out of business. Abd, if I may add, if thrir business model can’t handle it, ah well, it’s the Free Market forces at work, isn’t it?…lol
Remember, people: MOA… it’s the “New Economy” fir 2010 and beyond….
Vinny
I apologise for all the typos in my post above. Typing on on iPhone with my thick fingers isn’t always easy…:)
Vinny
In Australia, in certain stores(Aldi comes to mind) if you’re paying with credit card as opposed with pin card you get charged extra 1.5% of the transaction. That way only customers who choose to use credit cards pay for the privilege and the those stores do not pass the cost of credit card transactions to rest of us. (i.e why should I be paying for your credit card points)
Vinny:
Max out / walk away: how does that work? Can’t they garnish your wages? Boy if I could figure out a way to do that, with no repercussions (I don’t care about FICO) I’d be in Paris tomorrow.
It doesn’t work if you are caught – the bankcruptcy judge will deny you protection for the maxed out credit card if you obviously abused it with bankcruptcy in mind. You will have to pay it back.
I know 2 young doctors and a pharmacist who did it while in school because they lived off of credit cards. By the time they finished their residency the statute of limitation kicked in so they never had to file for bankruptcy because it was uncollectable already.
They don’t seem to sweat it.
Vinny
Monopoly can be defined by any business just by arbitrarily narrowly defining the market. In terms of methods to pay for good, there is cash, checks, auto-check machines, debit, money order, cashiers check, visa, MC, Amex, etc.
Retailers can effectively charge a different price between cash/credit, I see it at gas stations all the time, and many internet businesses charge a 3% surcharge for VISA/MC.
In this Libertarian/Austrian/Neoliberal paradise called Mexico, the 1 to 3% exchange rates that Yves cites seem quite tame. Here they run 4 to 6%.
Merchants (Costco and Pemex are notable examples of those who do this) can and frequently do add on a 5 or 6% surcharge for those who want to use their Visa or Mastercard.
Almost all banks in Mexico are owned by foreigners. Banamex, for instance, is owned by Citicorp, and because of the inordinate amount of money it makes here, is often referred to as the “Crown Jewel of Citicorp.”
So those who live in the US really don’t have it so bad. Just imagine if you lived in Mexico, where US neocons keep a loaded gun cocked and aimed at Mexico’s head, ready to fire if Mexico doesn’t march in lockstep with America’s neoliberal mandate. At least in the US there is still some semblance of a democracy, even though it is quite incompetent.
For much more on abusive credit card and debit card practices in Mexico, see this article:
http://www.corpwatch.org/article.php?id=15356
All this is, as the article points out, a house of cards (double entendre intended). If it weren’t for government bailouts, both direct and indirect (by government bailing out customers who are struggling to pay their credit card debt), perhaps it would have already all come crashing down.
If it does come tumbling down, what do you think Citicorp’s $30 billion investment in Mexico is going to be worth?
And I know that correlation does not necessarily mean causality, but Americans should also consider that the two Latin American countries of any great size that still embrace neoliberalism—Mexico and Columbia—are also Latin America’s two premier narco states.
Canada has a better solution. The debit card business is controlled by the banks through a commonly held organization – Interac – that handles the clearing. Up until now Visa and Mastercard debit cards have not had any success – but Visa and Mastercard are pushing hard for Canadian entry. Interac so far has been quite a success story keeping costs low and service quite high (easy to clear when all your banks are part of one shared network).
Same in Germany – the bank issued electronic cash (ec) cards are more widely accepted than VISA and Masters, because the charge the merchants less. Outside Germany, the ec-card system cooperates with Masters.
Paypal is also in on this game, with fees charged based on credit rates but with most accounts backed by debit cards.
They do allow buyers to explicitly say to make a debit and if that choice is made, the fee is limited to $5 – that makes a big difference for some applications where immediate access to the money is not mandatory (say cruise tickets bought a month ahead). But they make that choice very hard to even know about.
Of course, that’s rather like Paypal’s merchant fees, which they say are a certain level based on your volume, but you have to ask to have those merchant fees apply to your account, otherwise you pay basically a flat 3% instead of the volume based lower fees.
Someone needs to invent a viable micro-payment structure – there you could do the world a favor charging a flat 3% fee on transactions worth just pennies. Newspapers could be viable if every page view on the web costs half a cent, for example. Same if you could offer micro-transaction cost services.
That we’re all paying basically 3% of our grocery costs for the privledge of swiping plastic boggles my mind. And at convenience stores, with purchases averaging a few dollars, the fees are proportionately higher because there is a fixed fee in addition to the percentage. Little wonder our local White Hen has a petition asking to outlaw plastic gouging.
Last year after the TARP giveaway I called for fiscal civil disobedience by staging a credit card payer strike here and at a couple of other financial blogs.
Stop paying the cards is the only way the congress sluts are going to start paying attention to bringing criminal investigation/indictments/convictions. And, if RICO is invoked, we could benefit from seizure of ill gotten gains.
Who is with me? I would like to see a discussion of this idea. The law enforcement thugs are much better armed so I really thing this would be a best way to start a civil reaction.
Buzz Meeks
You make excellent points.
Vi ny
This is in addition to the risk to the consumer for the signature debit cards.
If your credit card number is compromised, you complain to the bank, they freeze the credit line, and after an investigation, issue you a new card/number for your account, cancelling the fraudulent activity. You can’t use the credit line during this period of time, which is inconvenient, but not otherwise damaging.
If your signature debit card number is compromised (remember, it can be used like a credit card), you complain to the bank, they have 20 business days to investigate, and up to 90 days to do an extended investigation with a temporary credit to your account.
Your funds are gone for the initial investigation, and I hope you don’t have any outstanding bills due/paid with that account, and that it doesn’t become overdrawn. If it does overdraw, and the investigation confirms the fraud, your bank will reimburse you for the funds/fees etc. on your account, but there is no requirement for those paid on insufficient funds off the raided account to waive fees, not report you to the credit bureau, or otherwise make you pay for the bounced funds. (Not that they can’t, but they aren’t required to.) Hope your car payment/insurance premium/rent or mortgage isn’t what gets bounced.
As Yves does, I only access my accounts via ATM/pin debit. I have a separate credit card for those places that must have a card.
I have two solutions for those who must have a signature debit card (usable as credit or debit). First, tie it only to a small account used only for convenience expenses (groceries, gas, and the like), don’t write checks off that account, and do not have overdraft protection that will drain your other accounts should the sig debit card be compromised. The lesser option is to at least daily check activity on the account to insure that, if there is a compromise, that it is caught quickly and with hopefully less damage (though you’d be surprised on how fast such accounts could be drained).
And why don’t we have 5 or 6 digit pin numbers available in the USA for debit cards?
My bank ATM debit card only allows for 4 digits. Is it just the bank I deal with or everyone?
Standard in U.S.
Yes, government regulation of the financial markets, and any market for that matter, will result is more equitable distribution of wealth. Neoliberal Mexico (whatever that means) could really do well to emulate the controls North Korea has put into place to manage competition. Their income distribution is quite homogeneous.
Let’s arbitrarily decide how much visa can charge for the shit of it because it makes us feel good. Yes, let us plunder voluntary markets and steal ‘ill-gotten gains’ for those of us who voluntarily signed up for visa and voluntarily use it to pay vendors who voluntarily think it’s a good idea for them to have it available to serve their customers.
Yes, ignoramuses in the government will only take advantage of us for our stupidity in the fantasy they are somehow looking out for the little guy.
And you, sir, must be a mailroom employee at Citibank. Since you receive minimum wage, no benefits whatsoever, and a “secured” $200 corporate card, you feel unbelievably blessed, and must thus show absolute sllegiance to your employer, publicly defending its despikable practices. Am I right?
Your only dilemma at the moment is that your wife is 6 months pregnant, since Citi offered you no health insursnce she has received no prenatal care, and you have no idea how you’ll pay for the birth. But you’re blessed nonetheless, huh?
Vinny
That’s an interesting way to frame your reply Vinny, that must be the method you advance your agenda of increased taxation and regulation; make up a fairy tale of woe that has no basis in reality.
The reality of the situation is Obama is about to sign the biggest subsidy to health insurers (which are most are non-profit) ever, and on top of that a penalty for not giving your money to them. Health insurance is the most regulated industry second only to, gee financial services. I bet moveon is really pleased with your motivation comrade.
We don’t have health insurance in this country- we have transfer payments from the healthy/young to the old/sick. Insurance cannot be made against an expected loss.
Regarding spread of risk, it sort of follows the old saying don’t have all your eggs in one basket. If the unbelievable event occurs of your bank account being drained due to debit card fraud and your bank not reimbursing you some reasonable amount immediately, why not have two CHECKING accounts at two different institutions with different cards and pins. Repeat as necessary with regard to your exposure.
Well, as a doctor who practiced in this American healh care, if you can even call it that way, iI will say that t is a total and complete disaster, not only from a fonancial aspect but also from a human one. Anybody who would want to maintain this malignant monstrosity can be either very uninformed about the tragedy that it represents, or must have something to gain from the current status.
Oh’bama’s heqlth care and insurance “reform” is yet another betrayal of the American people. As I stated here before, Oh’bama has been the ultimate Trojan Horse. The ultimate bait and swither. I voted fir him because I believed his campaign lies.
Vinny
Does anyone common sense in this country? This is one of the most articulate and intellectually rigorous blogs in the world and Yves is very savvy and precise in her posts, not to mention wonderfully witty, but do most of the commentators here still live with their parents?
Fraud guy, is it so hard to imagine you should spread your risk? Maybe have two checking accounts, or maybe just ask what fraud protections a bank offers before dumping all of your life savings into a checking account and being kicked out in the snow because some bad man used your debit card? Are you for real or are you just trying to advocate for more government intervention because YOU can’t manage your money and you blame companies for YOUR lack of financial intelligence?
Please increase regulations on credit cards and banks so everything costs more. We have a pathology in this country believing throwing money at scaremongers will satiate their demands.
Dude, you got me. How did you know I still live with my parents? Did you also find out that last week I took my dad’s Corvette keys and his Visa card and drovo to Vegas with my buddies, smoking pot and picking up hookers all the way? I maxed out his card, wrecked his Vette, so now I’m grounded for a year. Yeah, that’s like most readers of this blog.
But I don’t undestand what you mean by “spreading the risk” among more than one accounts. Do you mean, have more than one card to max out? Or, do you mean that last week I should have taken my mother’s MasterCard too? Please explain how I may personally benefit from this risk spreading strategy.
Vinny
Hmm, rereading my note, I did advocate having dual accounts, so I’m not sure why you’re stating this.
Also, no matter what the fraud protections the bank has in place, card numbers (all that are needed) can still be generated by a RNG (random number generator) and the account drained no matter what precautions are taken. Or your use of the card can be hacked from the merchants you shop at.
I don’t see anywhere here that I’ve advocated for more government intervention, just explained what the regulations in place are. And I believe the idea of Yves’ post is that the duopoly of the card associations is raising the costs to merchants and consumers. From years in card processing, I can’t disagree with that.
Ill gotten gains- perhaps this snippet from Karl Denninger says it better than I can.
“My math puts the total amount of money stolen from you, the taxpayer, to keep firms that intentionally levered up and promoted an asset bubble via imprudent and even fraudulent lending afloat, as well over $1 trillion dollars during the last 12 months – and that’s just from these three scams alone ($400 billion Fan/Fred, $500 billion PPIP, $170 billion AIG) and ignores the TARP, much of which is involved in this as well.
Your money is being stolen at gunpoint via future taxation not only from you but also from your children and grandchildren, yet not one penny has been clawed back from these bankers and other executives who continue to enjoy lifestyles powered by the fruits of imprudent and fraudulent lending – lifestyles that, absent our government stealing from you, would have ended immediately as these firms were liquidated and the bankruptcy attorneys feasted on clawbacks and judicial asset freezes.
When will you wake up America?
PS: Enjoy the rally in the market from the layered scams and theft, but don’t believe it will lead to a durable recovery in the economy. It won’t, and being prepared for that recognition in the marketplace would be a really, really good idea.”
Add TARP, flash trading, Goldman Sucks shorting CDS housing paper, the list goes on. Perhaps this helps you understand my point. The sluts in office will have to start representing the public if we prove that we cannot be delivered to the mercies of the banksters. An economic payers strike will put a real crimp on the banking lobby delivering cash to campaigns- the reason? Because the incumbent slut cannot deliver. And by putting cash back into your local merchants they also get a cash flow going.
Thirty or forty million economic strikers will swamp the system. This the only way we are going to be able to hurt these bastards.
Buzz Meeks
But in order to maximize the efficacy of the strategy you describe, I’d like to add that the debtor should first max out the credit line, and only then go on payment strike.
Hence the brilliant concept of MOWA – Max Out, Walk Away.
They can only ruin your credit score, which today is completely irrelevant.
Vinny
Regarding signature cards, my credit union was able to turn off the debit portion of my debit card when I asked. Now it’s just a PIN card that I only use for the ATM.
Especially at small businesses, I ask if they want a check or credit card. It depends on their processing costs. My hairdresser always prefers a check, but Minnesota Public Radio prefers their donations to be electronic and plastic. Interchange costs are high, but I’m not sure it’s any cheaper for a business to process a high volume of paper checks.
“[A]nd where is the Department of Justice, pray tell? In Australia, the government has been all over the credit card industry, although some of its measures appear to have backfired.” Can’t you connect the dots here? Better leave the government out of it: there is no economic situation that they can’t make worse, with their stock-in-trade populist grandstanding.