Visa & Mastercard Lose Big Profits; Are You Sad?
It seems that Visa and Mastercard are lamenting the old days of being able to stick it to, well, us. That’s because a new law will eliminate many of the fees they’ve been adding to transactions for years, which have driven up prices, in essence saying they’re frivolous and not needed for the reason these companies said they were charging the fees in the first place.
What? You hadn’t noticed it? That’s because most of us have had no clue just how much these companies charge businesses we frequent for the luxury we all enjoy of using our debit cards as credit cards when we go to buy something. Right now, these two charge around 1% of whatever we purchase, which might not seem like a lot on the surface, but when you’re talking volumes it’s quite high.
As a for instance, you spend $100 at a store, they get paid a dollar. Sounds small? Well, these companies combined for more than $16 billion in fees last year; still sound small?
What’s going to happen now? The limit on fees is going from 1% to 12 cents; you read that correct, “cents”. Supposedly that’s how it works in other corners of the globe; only the U.S. has been taking it on the chin like this for awhile. Of course, there’s a major difference between 1% and 12 cents on $100. The amount starts getting close if you don’t spend that kind of money, which means if you go to your grocery store and only buy $6 worth of gum and candy, Visa and Mastercard will still benefit from your purchase.
As a matter of fact, anything less than $12 benefits Visa, Mastercard, and the banks, who got a large portion of those extra funds. That’s the part that may not be to our benefit with this legislation. If banks don’t think they’ll generate enough income from this process, they could decide not to put out those cards anymore, which then might mean any purchases we made would have to either be cash, check, or debit card, which everyone might not accept and would allow banks to charge us those debit fees that we hate. Talk about a double edged sword.
Where do you stand on this? Do you like the possibility of lower prices versus higher bank fees?