Hidden transaction fees boosting costs for consumers

Posted March 27, 2011, at 5:41 p.m.
Last modified March 27, 2011, at 9:11 p.m.

I don’t put bumper stickers on my car. If I did, the first one would say “Real Mainers Pay Cash.”

The phrase captures an idea whose time has surely come. Hidden fees that fuel the plastic transaction industry are driving up costs for everyone, including small businesses that can hardly stand any more charges.

The people who brought you credit and debit cards and all manner of fees associated with them are fighting with makers of the latest generation of cellular phones. Why? Because many phones in the U.S. could be simply waved over a device and used to charge purchases.

That’s already being done in other parts of the world, but we’re not quite ready. When it is time to roll out the latest do-everything phone — complete with ready-to-scan charge mode — the competing industries will have struck some sort of deal to divvy up the fees that will be charged for using the “mobile wallets.”

The fee on each transaction may be small, but multiply by billions of transactions and pretty soon you’re talking real money, as the late Sen. Everett Dirksen famously stated. That’s why the fight is already underway over a proposed rollback in fees on debit card transactions.

Attention has been focused on “swipe fees” since Congress passed the Dodd-Frank financial reform bill last year. The law directed the Federal Reserve to come up with a reasonable transaction fee, and the Fed came up with a cap of 12 cents. Since the industry average is around 44 cents, the electronic transaction industry raised a ruckus.

The industry argued 12 cents wouldn’t even cover the cost of the transactions, never mind addressing the fraud many card users perpetrate. The Fed says it can’t meet an April deadline for finalizing rules on the swipe fees. Several senators have sponsored legislation calling for a two-year delay and a one-year study while we wait.

All of which gives the card industry a chance to slug it out with retailers. Later, they can all fight with the mobile wallet folks. Finger-pointing about who’ll be responsible for robbing consumers yet again is underway in ad campaigns. The only certain outcome is a basic law of the American marketplace: The consumer pays most, if not all, hidden costs in the end.

Maybe that’s the best reason to take a step backward. Phil Frederick has a little sign on the counter at Bangor Floral which reads, “Life turns on cash (not Visa or Mastercard). Please use it here if you can and [in red letters] Help us lower our cost of doing business.”

Frederick makes no excuses for passing on his processing costs. “The consumer’s got to pay it,” he says, adding that all small businesses are on such tight margins they’re doing everything they can just to stay in business. If we as consumers can save on those hidden fees and help a local enterprise in the process, let’s do it.

We’re not saying “Cut up your cards” (although that’s not bad advice for some over-users). Plastic has its place, but hauling out a debit card with its associated fees for every quart of milk bought at a corner store will sooner or later drive that little storekeeper under.

We’ve seen too much of that already in the name of “convenience.” Let’s go back to the old ways as much as we can by using currency. Those “discount for cash” signs might just make a comeback, and the health of our neighbors in the local business sector along with them.

Consumer Forum is a collaboration of the Bangor Daily News and Northeast CONTACT, Maine’s membership-funded, nonprofit consumer organization. Individual and business memberships are available at modest rates. For assistance with consumer-related issues, including consumer fraud and identity theft, or for more information, write: Consumer Forum, P.O. Box 486, Brewer 04412, go to http://necontact.wordpress.com, or e-mail atcontacexdir@live.com.

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