Back to Metroland's Home Page!
 Site Search
   Search Metroland.Net
   View Classified Ads
   Place a Classified Ad
   Online Personals
   Place A Print Ad
 Columns & Opinions
   Looking Up
   Rapp On This
   Best Intelligencer
 News & Features
   What a Week
   Loose Ends
   This Week's Review
   The Dining Guide
   Tech Life
   The Over-30 Club
 Cinema & Video
   Weekly Reviews
   The Movie Schedule
   Listen Here
   Art Murmur
   Night & Day
   Event Listings
 About Metroland
   Where We Are
   Who We Are
   What We Do
   Work For Us
   Place An Ad

Pay Cash

I always figured I was putting one over on the credit card companies. I had it engrained in my head very early on (thanks Mom and Dad!) that I should never ever carry a balance on my credit card, and despite some shaky financial times, Iíve stuck to that.

Theyíre not getting anything out of me, I thought. No interest, no late fees. In fact, theyíre just giving me a one-month interest-free loan. Ha.

I stopped carrying much cash, especially as ATM fees rose and I wanted to keep banking with a credit union even though I canít walk to a local branch. I set most of my bills to go to automatic payment by my credit card and racked up free train tickets left and right with my Amtrak Guest Rewards card.

I should have known better. Large financial institutions letting me use their products but get away with not generating profit for them? Not so likely.

I knew, vaguely, about ďinterchangeĒ fees, the fees a merchant pays to the issuing bank every time you use a card. What I didnít know, until I chanced recently on an article by Stacy Mitchell of the New Rules Project (also author of The Big Box Swindle), is that since the last time I paid any attention to them at a long-ago job, theyíve nearly doubled. And all those free miles/points/rewards? They are funded by even higher fees on those cards.

How this works is a lesson in perverse economic incentives: Visa, MasterCard, and AmEx are not competing for your and my business. Theyíre competing for the business of the banks: They want Chase, Citibank, etc. to issue their cards. And if the interchange fee goes to the banks . . . then the way to compete is to raise fees.

In 2008, the banks collected $48 billion in these fees: Thatís more than the total they collected in credit card late fees, over-the-limit fees, and ATM fees combined, and a quarter of the total credit card revenue stream. So it still matters that Iím not paying them interestóbut not nearly as much as I would have liked to believe.

Soaring interchange fees screw over small business: They lose tons of sales if they donít take credit cards. But they are limited by law from passing on the fees to customers and by their contracts with the credit card companies from refusing the higher-fee rewards cards. They are also, so far, limited by anti-trust law from coming together to negotiate for lower fees.

This is going to sound familiar (universal health care anyone?), but nearly 20 other countries have decided that this is a clear market failure and have passed regulation to cap these fees, often at levels about a quarter of what U.S. businesses are paying. (Arenít we business friendly here? Oh right, weíre not. Weíre massive corporation friendly.)

Thereís nothing like that in the works here, though I would think the public mood would be better now for it than it has been in a long time. The Credit Card Fair Fee Act would at least let merchants negotiate collectively (though that process would be dominated by large retailers who might not have the interests of small business in mind), but even that has only 16 cosponsors in the House and none in the Senate and has been sitting in their respective Judiciary committees since last June.

So for now, if small businesses are to stay in business, they pass on those fees by raising prices for everyone. With the sickening result, as Mitchell says, that ďa low-income shopper paying with cash ends up subsidizing the free airline miles given to a high-income shopper using an American Express Delta Skymiles card.Ē


So much for getting one over on the man. So now comes the awkward weaning process off a plastic-only lifestyle. Itís going to be slow and unpleasant and inconsistent, I expect: Iíve gotten incredibly unused to having cash on hand and keeping track of it. Switching to having enough of it without suddenly drowning in ATM fees and being able to figure out where I spent it all (not to mention distinguishing between cash from the family account and my personal account) is really rather daunting.

At least it doesnít have to be total. Anything I spend online or with a national companyómy utility bills, cell phone minutes, gas for the carócan still go on the credit card. I donít have to go back to remembering to write monthly checks for my bills (Iíll find other ways to support my post office). Verizon and CVS can pay as many fees as anyone wants to charge them as far as Iím concerned. I suppose in a fight Iíd want T-mobile to win over Chase, but Iím not concerned about either of them.

And if Iím stuck without cash at a local business I care about, I guess at least I can whip out the credit union debit card instead of the high-fee big-bank rewards card.

Baby steps, I suppose. Maybe Iíll start a support group. We can meet at a local cafť and pay cash.

óMiriam Axel-Lute

Send A Letter to Our Editor
Back Home
Copyright © 2002 Lou Communications, Inc., 419 Madison Ave., Albany, NY 12210. All rights reserved.