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Best Online Savings & Money Market Account Rates 2025

Best Online Savings & Money Market Account Rates

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Senator Dick Durbin Argues that Credit and Debit Card Markets Are a Monopoly and Government Intervention is Required

Illinois Senator Dick Durban makes the argument that excessive fees for accepting credit cards and debit cards are impairing Small Businesses as well as consumers to the benefit of the country's largest banks.

Businesses around the country, particularly small businesses, are being charged excessive fees for accepting credit cards, according to Senator Dick Durbin of Illinois. He assets that so-called interchange fees are passed onto consumers in the form of higher prices, and as a result consumers are paying the ultimate burden of these so called interchange fees which total $50 billion in the US in 2008.

Visa and MasterCard require an interchange fee of one to three percent of the transaction amount to be paid every time someone uses a debit or credit card. Through arrangements with member banks, these companies then deliver the interchange fees to member banks with approximately 80% of the money winding up in the hands of the 10 largest US banks.

Senator Dick Durbin claims that American consumers and retailers are being nickled and dimed to the benefit of big banks. The current interchange system, according to Durbin, is effectively a hidden tax eating away at those consumers and retailers who have already been left with the burden of bailing out the large banks after 2008.

An open market economy provides that the credit card companies and the banks should be allowed a fair return for facilitating payment (and, perhaps extending credit). It is very clearly demonstrated that consumers spend more money when they have a credit or debit card than they would with cash or with a check, thus leaving most small business no choice but to accept credit card payments.

Nevertheless Durbin asserts that the fees are not fairly and transparently negotiated. Rather, he claims that the terms are currently given to merchants on a “take-it or leave-it basis”. Durbin’s proposed amendments to the Wall Street reform bill, would direct the Federal Reserve to ensure that debit card interchange fees be "reasonable and proportional" to the costs incurred in processing the transaction. The legislation would also strip anti-competitive provisions from Visa and MasterCard's contracts. Durbin asserts that in a normal market following his amendment, banks would compete with one another to win merchant business.

What do you think? Should the Durbin Amendment be passed to lower transaction costs for small businesses with the savings potentially being passed on to consumers? Or, do you feel that the credit card companies and banks get a fair return for the credit card and debit card services that they provide and should not be hampered by the federal government?


Chase, Wells Fargo and Other Banks Cancel Debit Card Rewards Program

Chase, Wells Fargo, and SunTrust recently announced they are cancelling their debit card reward program in response to the new rulings on "swipe fees" that limit the amount that large banks can charge retailers for debit card transactions, according to Blake Ellis from CNN Money. In a recent Bloomberg article, Well's spokewoman Lisa Westermann was quoted as saying:

“Due to pending regulatory changes that are expected to result in a significant reduction in fees retailers pay issuers for debit-card transactions, Wells Fargo will no longer be enrolling customers in the debit-card rewards programs.”

The pending regulation would cap debit card swipe fees to $.12, down nearly 70% from what banks can charge today. Banks have been lobbying to try and delay or change the Fed ruling and have warned that the ruling would impact their debit card rewards programs.

These changes will take effect April 15 for Wells customers (March 27 for customers with a Wachovia account). Chase debit card reward points will be eliminated on July 19, although the bank stopped awarding points in February 2011. SunTrust will stop awarding points on April 15 and will existing points will expire on January 1, 2012.

The changes show how banks are changing to deal with new regulations that limits fees on everything from debit cards to overdrafts. Bank of America and Wells Fargo recently announced plans to curtail their free checking programs.


CheckSpring Bank -The Bank for the Underbanked

many banks actively motivate change in their community. Checkspring Bank is one such bank as its business model is focused around assisting the unbanked or underbanked.

According to the British government-backed watchdog, Consumer Focus, almost 1,000,000 Britons - or about 2% of the British population - does not have a bank account. If we were to extrapolate these figures to the United States, where to 2010 census reported 308,745,538 residents, we would assume that at least 6 million people do not have bank accounts. Many have preyed on this group in order to extract great fees, such as Russell Simmons, media mogul and founder of Def Jam Records who introduced the Rush Card, a prepaid debit card that caters to the underbanked needs. Yet, nobody has addressed this group's fundamental problem: How to maintain financial stability in this economy and society.

So, what is the option for this population? They could work exclusively with cash, but in today's society paperless is becoming the norm and cash itself is fragile. It can be lost, damaged or stolen. Further, how many employers pay cash? Another more viable option is that this population use check cashing establishments. However immediate this solution is, the fees are high and this does not establish any sort of credit or build savings.

One upstart bank in the South Bronx is focused on the needs of the unbanked and underbanked to improve the socio-economic environment of the area. Four year old CheckSpring Bank is targeting this population in the Greater New York City Metro Area. It identifies its purpose as establishing a low cost alternative to check cashing establishments while allowing those customers to establish credit, build assets and save money. These are often habits and traits taken for granted, but are in fact are learned behaviors.

CheckSpring is specifically located in the Bronx to counter the Crain's New York Business observation that, "While [in 2007] Manhattan boast(ed) just 3,000 people per bank branch, the South Bronx (had) about 15,000 residents per branch." CheckSpring is FDIC insured and has created a following of these underbanked consumers. To encourage the transition to mainstream financial products, CheckSpring offers customers a choice between convenience services such as check cashing, bill pay and money transfers, and the deposit and lending products available at traditional banks.

This asset based society needs money to grow. By having underbanked consumers begin to create a foundation of assets the bank then can lend to local businesses. CheckSpring is an approved SBA (Small Business Administration) lender. CheckSpring also offers youth savings match programs, tax refund match programs and check casher-to-depositor transition products. Traditional savings, checking and CD accounts are also available.

To further its mission, CheckSpring is partnered with Ariva Inc., a Bronx based non-profit that provides customers with access to free tax preparation services and financial education classes. CheckSpring also partners with Seedco, Newark Now and Food Bank for New York to support asset building programs throughout the region.

While "banking" and "banker" is often [recently] deemed selfish or opaque or greedy, some banks are actively motivating change. It should be noted CheckSpring is not a non-profit organization, the end game is for the stakeholders of CheckSpring to make money and that one need not be of the underbanked population to use their services and products. Currently it is a small bank focused on the unbanked segment; however, they have plans to expand their model to other regions.