Credit Card Stranglehold

Next time you go out shopping, look at the front door, or near the credit card machine and see what types of credit cards the store takes. There is about a 99% chance that the company takes Visa and/or Mastercard. And there is a bill that will hit the Senate floor that will attempt to overhaul the credit card world. One of the things that store owners hope will be in the bill is the ability to negotiate fees with credit cards. Because when you use a credit card, the store must pay a fee. Small per transaction, sure, but overall, it cost companies $48 billion last year. A hefty sum indeed. Some people argue that Visa and Mastercard operate a dual monopoly (is that a contradiction?). Because if you do not take Visa and/or Mastercard, you will likely lose business. Most stores also take American Express or Discover card, but nearly all stores take V & MC. Card issuers claim that there is no monopoly and that new payment methods such as Paypal enter the market everyday, increasing competetion. But let's be honest, store owners are slow and reluctant to change, especially when new payment methods are not likely to have a strong, vocal backing. The solution: pass the bill in the Senate that allows store owners to renegotiate with credit card companies the fees that are levied against the stores.

Week 11: Bank Overdraft Fees

Besides the national banking meltdown, bank overdraft fees have contributed to Americans' mistrust in banks. Last weekend, I deposited my paycheck in the bank Saturday morning. That evening, I bought something to eat after I got off work. The cost of the food was more than I had in my checking account, and when I was checking my accounts that night, I noticed that my available balance was $-1.16. I panicked and thought I would get charged an overdraft fee, even though I believed that the charge should not be debited from by account until Monday, after my paycheck had been processed. All in all, I was not charged a fee, but the fear of having the fee assessed was enough for me. Why do banks charge fees anyway? Why not just decline the charge on the basis on Insufficient Funds. That would have saved me a ton of worry. According to this article, banks claim that it is impossible to maintain real time balances on many checking accounts due to the amount of debits and credits processing at any one time. Couldn't they just have a screen displaying available and ledger balance? That's what my bank does on their website. And the approximately $10 billion made off of "service fees", approximately one-third of a bank's income, could be used to install new software in their customer interfaces. I hope that eventually, a more open, speedy banking system will be available to customers.