Thursday, September 29, 2011

Costs Don't Just Magically Disappear

Remember Dodd-Frank? It was the sweeping law passed after the housing bubble that was going to regulate the banks and prevent them from being "casinos". Well, one of the things it did was to limit how much the bank can charge retailers on debit-card transactions. Ok, so let's see if we can do some logic: Price of providing debit-card transactions to the bank stays the same. The fees they charged have now been reduced to about half. What does the bank do? Well, they try to not lose money. Legal Insurrection has a good post on this issue.

It's pretty simple to me. If you tell a business that it has to charge half price for a certain produce (debit card use) they're going to raise the price in a corresponding amount on a different product. Duh. Apparently, our legislature is shocked, SHOCKED that businesses want to make money.

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