Durbin fee will cost debit card customers

The law of unintended consequenes accompanies every piece of legislation passed by congress. Conservatives recognize this fact of life; liberals don't.

That's how we get 3000 page health insurance "reform" bills and gigantic headaches like Dodd-Frank; a measure designed to "protect" consumers but whose unintended consequences will make credit harder to get for most, and cost consumers more in the long run.

The "Durbin fee" on debit cards is one such unintended consequence:

Durbin pitched his amendment, which empowered federal bureaucrats to fix the fees banks can charge merchants for each debit card transaction at 24 cents, as a blow to the "excess profits" of "big banks." Banks currently charge an average of just 44 cents per transaction, but for big retailers like Wal-Mart, all those transactions can add up. Analysts estimate that the Durbin amendment will be a $6.6 billion boon for the Targets and Walgreens of the world.

But big banks didn't become big by eating billion-dollar losses. Last week Bank of America announced it will start charging customers a $5 fee every month they make at least one debit transaction. And BofA is not alone. Wells Fargo, Chase and SunTrust are all instituting similar versions of the "Durbin fee." Washington Mutual says it is not adding any debit fees, but is tightening restrictions on free checking accounts. The bottom line is that whatever extra cash retailers are picking up from debit card transactions, consumers are losing from banks.

And it is not at all clear that consumers are going to recover any of the $6.6 billion more they will be paying banks in the form of lower prices from retailers. A study of Australian retail outlets after a similar regulation passed in that country found that none of the swipe-fee savings was passed along to consumers. So all the Durbin amendment really accomplished was a multibillion-dollar-a-year income redistribution from consumers to retailers, who have given more than $90,000 to Durbin this election cycle.

A similar story played out last week in the health care sector. On Tuesday the Kaiser Family Foundation released its annual survey of employer health benefits, which found that family health insurance premiums rose 9 percent this year -- sending them above $15,000 for the first time.

The moral of this story? Beware os liberals bearing "gifts."


The law of unintended consequenes accompanies every piece of legislation passed by congress. Conservatives recognize this fact of life; liberals don't.

That's how we get 3000 page health insurance "reform" bills and gigantic headaches like Dodd-Frank; a measure designed to "protect" consumers but whose unintended consequences will make credit harder to get for most, and cost consumers more in the long run.

The "Durbin fee" on debit cards is one such unintended consequence:

Durbin pitched his amendment, which empowered federal bureaucrats to fix the fees banks can charge merchants for each debit card transaction at 24 cents, as a blow to the "excess profits" of "big banks." Banks currently charge an average of just 44 cents per transaction, but for big retailers like Wal-Mart, all those transactions can add up. Analysts estimate that the Durbin amendment will be a $6.6 billion boon for the Targets and Walgreens of the world.

But big banks didn't become big by eating billion-dollar losses. Last week Bank of America announced it will start charging customers a $5 fee every month they make at least one debit transaction. And BofA is not alone. Wells Fargo, Chase and SunTrust are all instituting similar versions of the "Durbin fee." Washington Mutual says it is not adding any debit fees, but is tightening restrictions on free checking accounts. The bottom line is that whatever extra cash retailers are picking up from debit card transactions, consumers are losing from banks.

And it is not at all clear that consumers are going to recover any of the $6.6 billion more they will be paying banks in the form of lower prices from retailers. A study of Australian retail outlets after a similar regulation passed in that country found that none of the swipe-fee savings was passed along to consumers. So all the Durbin amendment really accomplished was a multibillion-dollar-a-year income redistribution from consumers to retailers, who have given more than $90,000 to Durbin this election cycle.

A similar story played out last week in the health care sector. On Tuesday the Kaiser Family Foundation released its annual survey of employer health benefits, which found that family health insurance premiums rose 9 percent this year -- sending them above $15,000 for the first time.

The moral of this story? Beware os liberals bearing "gifts."


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