Debit Price Controls

Further exercising its tendency to impose arbitrary price controls, the U.S. Senate voted last week to give the Federal Reserve more power to regulate the fees banks charge businesses for debt-card swipes. To the shock of some lawmakers, “the fees imposed on debits are higher than the actual cost of processing those transactions.”

Photo by Dave Einsel/Getty ImagesIn business, charging more for a service than it actually costs is called making a profit — which, at least up until recently, was the whole idea behind businesses. But that’s not OK with pandering politicians all-to-eager to stick it to those “evil” banks.

The economic reality of this decision to control the price of debit-card fees will invariably lead to where most price controls lead: to less availability of the service. This decreased availability would come from the diminished financial incentive for banks to provide the service to businesses.

In addition, the intention of the bill is also reportedly to incentivize businesses to require certain amounts to be spent by customers before allowing them to pay via debit card. The inconvenience to customers of such an idea is obvious. If only the realities of economics were more obvious to politicians.

One Response to Debit Price Controls

  1. […] seeking financial reform — something sure to add more regulations on financial services, including ATM cards. Though they themselves do not appear to have much knowledge of or experience with ATMs, they are […]

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