Cost of the Debit Card

Washington (AP) — Swipe your debit card at the supermarket and you’ve placed yourself at the heart of a contentious congressional debate.

On one side are banks like JPMorgan Chase and Bank of America and credit card networks like Visa and MasterCard. On the other are retailers, including giants like Wal-Mart and Target.

At issue: The “swipe” fees banks charge merchants for one of today’s most commonplace conveniences. At stake: up to $20 billion in potential bank losses and merchant gains.

For consumers, it could mean lower prices at the local store or restaurant, or it could result in higher bank charges, fewer “rewards” for credit card users or even the imposition of an annual debit card fee.

The fight over plastic has been raging for years - a federal appeals court once called it “a clash of commercial titans.” Now it’s landed in the middle of a massive financial regulatory bill primarily aimed at restraining Wall Street.

Both sides have unleashed potent, well-heeled lobbying operations. Their efforts will converge on two weeks or more of negotiations between House and Senate lawmakers who are working to blend two separate financial overhaul bills into one.

The Senate bill contains a measure that would require the Federal Reserve to set limits on what fees banks and credit card networks can charge merchants for a debit card payment. The House bill has no such provision.

First, a quick lesson in shopping. A debit card payment taps directly into a customer’s bank account and, as such, is akin to writing a check. A credit card payment, on the other hand, is in effect a loan from the bank. One carries more risk than the other.

“We are convinced that fees to consumers would go up and services would be reduced.”- Americas for Visa Inc.

As a result, banks and credit card networks generally charge merchants up to 3 percent for credit card use. For debit card use, the charge to merchants is one-fourth to one-half as much.

Merchants maintain that the fee charged for debit cards, also called an “interchange” fee, is too high. Banks and Visa and MasterCard say the fee takes into account the cost of setting up and maintaining a secure and sophisticated debit payment system.

Last year, $1.21 trillion in purchases were paid with debit cards processed through the Visa and MasterCard networks, generating in $19.7 billion in fees paid by merchants, according to data from The Nilson Report, a trade publication. Most of the fees went to banks that issue debit cards.

http://minnesota.publicradio.org/display/web/2010/06/07/debitcardfees/

“Sticking it to the man”

Investment banker, Jeff Hagan, does what he does best, investing. So, he buys 100 Gillette Mach3 to avoid having to pay for upgrades that he doesn’t really care for.

“I’m a full-on capitalist, but there’s a little bit of ‘sticking it to the man’ here that I enjoy,” says Mr. Hagan of his stockpile of Mach3 blades, which Gillette launched 12 years ago.

http://finance.yahoo.com/family-home/article/110050/razor-burn-a-flood-of-fancy-shavers-leaves-some-men-feeling-nicked

U.S. Stocks Fall Sharply, Following Asia and Europe

“Stocks in the United States fell sharply Tuesday, following a broad sell-off in Europe and Asia that was fueled by concerns over the pace of growth in the global economy.

Stocks in Shanghai set off the decline after the Conference Board, a private research group, said it had recalculated its leading economic index for China to show a 0.3 percent gain in April, down from the 1.7 percent gain it reported two weeks ago.

Trade in European markets followed and turned lower, and then the contagion of declines spread to the United States, where the Dow dipped below the 10,000 level soon after the opening bell.

In afternoon trading, the Euro Stoxx 50 index of euro-zone blue chips fell 2.9 percent, while the FTSE 100 index in London fell 2.2 percent.

“It’s a continuation of what we’ve been seeing for months,” Gary Baker, an equity strategist at Banc of America Securities-Merrill Lynch in London, said. “There’s re-evaluation of global growth prospects going on. Will 2011 turn out weaker than 2010?”

In afternoon trading in the United States, the Dow was down 220.75 points, or 2.18 percent, at 9,917.77. The Standard & Poor’s 500-stock index was down 27.26 points, or 2.54 percent, at 1,047.31, and the Nasdaq composite index fell 68.54 points, or 3.09 percent, to 2,152.11.

Quincy Krosby, a chief market strategist for Prudential Financial, portrayed a series of events that led to the chain reaction of sell-offs. There were concerns over growth in China; higher unemployment figures in Japan; worries over banks in Europe; and strikes in Greece and Spain.

Take note:

“I think it all goes back to this deflation trend that seems to be taking place,” said Tom di Galoma, the United States head of fixed-income rates trading at Guggenheim Partners. “The Fed is on hold and you are starting to see investors panic on interest rates, thinking they don’t have enough bonds in their portfolio.”

Chinese investors were also awaiting an initial public offering from Agricultural Bank of China that is expected to raise about $23 billion, a market splash some feared would draw money from other issues as fund managers rebalance their portfolios to include the new entrant.

The dollar gained against major European currencies, with the euro falling to $1.2190 from $1.2277 late Monday, and the British pound falling to $1.5022 from $1.5104.

But the United States currency declined against its Japanese counterpart, dropping to 88.75 yen from 89.37 yen — its lowest level since early March.

Crude oil futures for August delivery fell $1.40 to $76.85 a barrel. Comex gold fell $2.10 to $1,236.50 an ounce.

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For whole article: http://www.nytimes.com/2010/06/30/business/30markets.html?hp

Fears Intensify that Euro Crisis Will Snowball

By NELSON D. SCHWARTZ and ERIC DASH

Published: May 16, 2010

After a brief respite following the announcement last week of a nearly $1 trillion bailout plan for Europe, fear in the financial markets is building again, this time over worries that the Continent’s biggest banks face strains that will hobble European economies.

Gill Allen/Bloomberg News

The rate banks charge one another for overnight loans, known as Libor, is set daily in Canary Wharf in London.

Debt Rising in Europe

In a sign of the depth of the anxiety,the euro fell Friday to its lowest level since the depth of the financial crisis, as investors abandoned the currency as well as stocks in favor of gold and other assets seen as offering more safety.

In trading early Monday morning, the euro declined again, managing at one time to reach a four-year low relative to the dollar.

The president of the European Central Bank, Jean-Claude Trichet, in an interview published Saturday, warned that Europe was facing “severe tensions” and that the markets were fragile.

For Europe’s banks, the problems are twofold. Short-term borrowing costs are rising, which could lead institutions to cut back on new loans and call in old ones, crimping economic growth.

At the same time, seemingly safe institutions in more solid economies like France and Germany hold vast amounts of bonds from their more shaky neighbors, like Spain, Portugal and Greece.

Investors fear that with many governments groaning under the weight of huge deficits, the debt of weaker nations that use the euro currency will have to be restructured, deeply lowering the value of their bonds. That would hit European financial institutions hard, and may ricochet through the global banking system.

Bourses and bank shares in Europe plunged on Friday because of these fears, with Wall Street following suit. Shares were also down in Tokyo and Australia in early trading on Monday.

“This bailout wasn’t done to help the Greeks; it was done to help the French and German banks,” said Niall Ferguson, an economic historian at Harvard. “They’ve poured some water on the fire, but the fire has not gone out.”

The European rescue plan, totaling 750 billion euros, is intended to head off the risk of default but would vastly increase borrowing. That could hamstring Europe’s nascent recovery.

Indeed, it was too much debt that caused the problem in the first place: a new report by the International Monetary Fund warns that “high levels of public indebtedness could weigh on economic growth for years.”

The world’s budget deficit as a percentage of gross domestic product now stands at 6 percent, up from just 0.3 percent before the financial crisis. If public debt is not lowered back to precrisis levels, the I.M.F. report said, growth in advanced economies could decline by half a percentage point annually.

Read more. —> http://www.nytimes.com/2010/05/17/business/global/17fear.html?ref=todayspaper