The Interchange Fee Rules Hit Home


A couple of weeks ago, I lost my debit card.  Well, "lost" is a strong word.  I'm sure it's somewhere in my house, but since I don't know where it is in my house, and I kind of need a debit card, I had to go into the bank yesterday and ask for a replacement.

Bad news.  My American Airlines AAdvantage debit card, which I have been using with great joy for years, has been cancelled.  In truth, I'd been expecting this to happen ever since Dick Durbin managed to pass a price cap on interchange fees in order to help his friends in the retail sector.

So naturally, I did what I had to: I opened up a new American Airlines AAdvantage credit card, which I will use instead.

I'm very much not happy about this turn of events.  I don't like using credit cards; they make it easier to spend too much, and harder to track our net worth.  But even less do I like cramming my extra long legs and my back problems into cattle class for long-haul flights, a problem I currently solve by using my accumulated miles to upgrade to first class.  So now I'll be using a credit card and paying off the balance every month, at some inconvenience to myself, and no gain to anyone.

Note that this mitigates the one even semi-plausible claim about the vast benefits of price caps on interchange fees.  Sure, you might have higher fees for your checking account and debit card use; sure they might take away your miles.  But hopefully we'd get lower prices, as competition forced retailers to pass the savings onto consumers.  Sure, this might be a fitful and lengthy process, but in the long run we'd all be better off . . . 

Unless the capped fees caused people like me to shift to credit cards, in which case there would be no savings, and no lessening of the regressivity that activists complained about, since the new fees are most likely to hit the smallest accounts.  In fact, as a result of this, I now have free checking that I didn't before, since in the shuffle, Citibank rationalized my old, expensive account into a global system that will eliminate the small monthly fees I used to pay--as long as I maintain a decent-sized balance.

So, thanks for nothing, Dick Durbin.  I sure hope Target and Wal-Mart sent you a nice fruit basket.
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Megan McArdle is a columnist at Bloomberg View and a former senior editor at The Atlantic. Her new book is The Up Side of Down.

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