Occupy Credit Card Companies

Dwolla is out to beat Visa, and their business model of 25 cent transaction fees no matter the size of the transaction has the potential to do that for transactions over $10-20 by people who aren’t on credit. Paypal charges 30 cents plus 1-3% of a transactions. Merchants pay a similar rate when they accept Visa, MasterCard and Amex. If Dwolla catches on, they’ll take a huge, and well-deserved, bite out of the credit card companies and the banks who profit from them.

It sounds like Dwolla is starting out the way Paypal did — focusing on person-to-person transactions and moving into being web transactions, so it will be a while before their much cheaper model proves out. The other issue with Dwolla is that it doesn’t address the paying for a cup of coffee scenario, because a quarter in interchange is a huge percentage of small transactions. But you don’t need to use Dwolla or some other disruptive payment company for that — just pay cash. Every day after 11/5 (Bank Transfer Day) should be Fuck the Credit Card Company day, and the way you fuck them the best is by leaving that little piece of plastic in your pocket and pulling out a dead president.

37 replies
  1. 1
    Punchy says:

    I bet credit cards were used by Sandusky to pay for gifts for his victims.

  2. 2
    dmsilev says:

    But you don’t need to use Dwolla or some other disruptive payment company for that—just pay cash. Every day after 11/5 (Bank Transfer Day) should be Fuck the Credit Card Company day, and the way you fuck them the best is by leaving that little piece of plastic in your pocket and pulling out a dead president.

    This.

    I usually visit the bank or an ATM on the weekend and withdraw spending money for the week. Besides eliminating the transaction fees, it’s a straightforward way of keeping miscellaneous expenses in line. If it’s Thursday and I look in my wallet and see $10 to get me through the next 1.5 days worth of life, I’m less likely to splurge on that $5 over-caloried coffee drink.

  3. 3
    cathyx says:

    A new business model of being less greedy can be a money maker. I hope they succeed.

  4. 4
    Ron says:

    I almost always pay for stuff with a debit card (using it as a credit card). Yes I could hit the ATM each week, but I actually find this gets me to be more careful with money rather than less.

  5. 5
    Rathskeller says:

    My partner and I use cash budgeting, and I highly recommend it. It helps you save money by making every purchase’s consequences real and immediate.

  6. 6
    James K. Polk, Esq. says:

    But, but, but, my Amazon rewards!

  7. 7
    jon says:

    The credit card companies will survive because most people are spending money they don’t have. But they’ll be less rich if Dwolla succeeds.

    I try to use cash for my everyday things and use credit/debit to pay for most of the online bills. But since I have little in the way of savings and lots in the way of needs and wants, I’m in debt to credit card companies. People like me are why they thrive.

    But at least I don’t nickel and dime the small businesses I frequent throughout the week.

  8. 8
    tkogrumpy says:

    I would think this would go without saying, but I would be wrong probably.

  9. 9
    Shawn in ShowMe says:

    @jon:

    The credit card companies will survive because most people are spending money they don’t have.

    Exactly. I don’t see how see this hurts the credit card companies much at all. The vast majority of credit card users are using it as a short-term loan. The party who would be hurt most by Dwolla’s success is PayPal.

  10. 10
    qtip says:

    I doubt this will catch on with the masses. Here’s my semi-sarcastic take on it:

    1. Cash is slow. I hate being in line behind people paying with cash, it wastes my time.

    2. “Cash accounting” is just a mind game like setting your clock ahead a few minutes. It’s really not hard to keep track of how much you spend on a credit card, I be most people can do it in their head if they really try. For those that can’t, most credit card companies let you look at your purchases online which makes it easier to get it into Excel where you can do serious budget tracking.

    3. Going to the bank every week and always making sure I have sufficient cash is tedious. Carrying lots of cash can be risky depending on where you are.

  11. 11
    WereBear says:

    @Shawn in ShowMe: The vast majority of credit card users are using it as a short-term loan.

    This need used to be addressed by the quaint old concept known as “savings.”

    I vaguely remember “savings” where I could lend money to myself absolutely free!

    But see, the new business model is to squeeze the consumer until they live paycheck to paycheck, and then have to use a credit card for things like car repair or a suddenly ruined work outfit or a kid falling out of a tree and a huge deductible appearing out of nowhere.

    Don’t you see how this works better for capitalism?

  12. 12
    debg says:

    @Ron:
    I’m the same way. The minute I put cash in my wallet, it’s as good as spent. However, the merchant still has to pay a fee on anything I buy with my debit card–my credit union discourages members from choosing the “debit” option because in that case the CU pays the fee.

    Is there any way to win? I love the ease of the debit card, but some poor schmuck (local merchant or bank) always has to pay the price.

  13. 13
    Roger Moore says:

    @dmsilev:

    I usually visit the bank or an ATM on the weekend and withdraw spending money for the week. Besides eliminating the transaction fees, it’s a straightforward way of keeping miscellaneous expenses in line.

    I use the same strategy, and it’s worked wonderfully to keep my budget in line. My bank’s ATMs even let you program favorite transactions, so I can just push the button and get my standard weekly withdrawal without the temptation of putting in a bigger number. It’s a lot easier than having a formal budget for all those things.

  14. 14
    RossInDetroit says:

    Pay Pal dings me 4% on most of my transactions. I’m generally collecting money from overseas but $40 on $1000 seems a bit steepish. Unfortunately, if you eBay and you’re not big enough to process credit card transactions directly they’re the only game in town.

  15. 15
    Roger Moore says:

    @debg:

    I love the ease of the debit card, but some poor schmuck (local merchant or bank) always has to pay the price.

    Bear in mind, though, that dealing with cash isn’t free for the merchant, either. It has to be counted and reconciled with the total from the cash register, which takes more time and effort than dealing with card transactions. It’s a target for thieves, both armed robbers and sticky fingered insiders, so it has to be kept some place safe, transported safely to the bank, etc. You have to make sure you have enough of the right denominations to be able to make change. And so on. You can think of those small charges the cards make as a way for the merchant to outsource those extra money handling steps.

  16. 16
    malraux says:

    @Roger Moore: Nor is cash all that free for the bank. Gotta count cash deposits, handle and sort the bills, etc. All the same problems that merchants have banks also have. In theory, using plastic should be cheaper than cash

  17. 17
    Shawn in ShowMe says:

    @RossInDetroit:

    If eBay ever accepts Dwolla as a payment option, I’ll be first in line to invest in the IPO. The smaller eBayers like yourself, who will only have to pay 25 cents per transaction, will become Dwolla evangelists overnight.

  18. 18
    cckids says:

    @debg: I also have the cash=gone issue. Several of the small businesses I frequent have a sign re: debit card use that reads “All debit card charges under $5 (or whatever amount) will be charged a .25 fee.” I don’t have a problem with it, but it drives my spouse nuts.

  19. 19
    elvislives says:

    Bitcoin concept is better imho.
    http://bitcoin.org/

  20. 20
    cckids says:

    @Roger Moore:

    dealing with cash isn’t free for the merchant, either.

    In addition to the physical costs of dealing with cash, banks charge merchants-restaurants & small retailers a fairly substantial amount to provide them with cash/change in the requested denominations. I have a friend who owns 3 small coffee shops; Wells Fargo charges him close to $8000 a month for change. When I first found that amount out, it dropped my jaw.

  21. 21
    Invigilator says:

    I put virtually all my purchases on a Mastercard, from which I get about 1.5% back to my bank account. But that’s USAA, which in many ways is more like a credit union than a bank. I haven’t had a commercial bank account since 1986.

  22. 22
    Joel says:

    @Shawn in ShowMe: eBay never will do that. They own Paypal.

  23. 23
    RossInDetroit says:

    @Shawn in ShowMe:

    If eBay ever accepts Dwolla as a payment option, I’ll be first in line to invest in the IPO.

    EBay for some time has required sellers to offer a payment option that can be rescinded in the case of a dispute. I get why this protects the buyer, as I’ve been stung bad on eBay scams. EBay owns part or all of Pay Pal so they have an interest in making people use it. There are other payment processors that qualify but Pay Pal is the 600 lb gorilla.
    I hate paying the fees, but how else am I going to get money from Minas Gerais or wherever to my ATM in a few days?
    I do so much business in Asia I looked into having HSBC take payments for me but I’m orders of magnitude too small for them to deal with as a merchant.

  24. 24
    Peter says:

    I pay for virtually everything on debit because, like was said above, the moment cash is in my wallet it is already spent. It’s also more convenient.

    I’m in Canada, though, and when we say ‘Debit’ we mean Interac. I’m not sure if it works the same way as Debit cards in the states do.

  25. 25
    Roger Moore says:

    @cckids:

    I have a friend who owns 3 small coffee shops; Wells Fargo charges him close to $8000 a month for change.

    It makes me wonder if that isn’t a big part of the reason Starbucks tries so hard to get people to use their stored value cards. I had always assumed that it was mostly a customer loyalty thing, but I can see that it might be cheaper and faster than handling a bunch of small cash transactions.

  26. 26
    Cain says:

    I use credit card, because thanks to services like Mint I can get instant idea of my cash flow and know where I am spending my money. I give up a bit of my privacy for that, but I reckon I’m already screwed just putting any online details on the web.

    I also pay off my credit card at the end of the month. So I pay no interest. It only sucks for the merchant.

    If possible I use my American Express which gives me 1 year extra warrantee on big purchases like say cell phones.

  27. 27
    Yutsano says:

    @Peter: Debit cards here are directly tied to chequing accounts. So the money gets transferred from those funds directly. If Interac works like that then it’s pretty much the same thing. I know to use a debit card in Canada it has to be assigned to a major credit issuer like Visa.

  28. 28
    JasmineB says:

    I always use cash for small purchases–go to the ATM every week, take some out, etc.

    With credit cards or debit cards, keep in mind your purchases are no longer private. For those of you saying that cash takes longer, I can’t count the number of times I’ve been standing behind a credit card user, waiting for them to sign their names on the paper, or waiting for the clerk to change the paper in the machine, or having the credit card not work and the person fishing around for another one. It’s nice that more and more shops are not requiring signatures (that does help), but I wouldn’t say cash usually takes much longer, and often takes less time.

    And for those of you who say once cash is in your pocket, it just disappears, well, thanks for not having self control! The financial elite approve whole heartedly, I’m sure!

  29. 29
    Ruckus says:

    @cckids:
    I’ve never been charged to get change/cash at the bank for my small business. And that was at Bunch of Assholes.

    Here’s the deal. Businesses add into the overhead the cost of providing credit/debt card access. If they don’t they are idiots. So everyone pays for when you use your card, cash or not. Most of us appreciate cash because we make a little tiny bit more on the transaction but the reality is most people use a card.
    The problem is not with the card use but the way the system is built. How many people are in other countries where you always use a pin#, credit or debit? It’s much safer and faster and the merchant does not need to keep a paper receipt. But in the US the banks/credit card cos want you to sign a piece of paper, making the merchant liable for the validity of the purchaser. And they get to charge us(all of us) more for that privilege.
    The other side is that when you charge something that money comes out of your account, credit or debit, immediately. It takes 2-3 banking days to put that into the merchants account. Where is that money during that time? How much is made off the float?

  30. 30
    Ruckus says:

    @Cain:
    I also pay off my credit card at the end of the month. So I pay no interest. It only sucks for the merchant.

    The merchant gets absolutely none of the interest anyone pays on their card. The bank/cc co keeps that. The merchant pays a transaction fee per use. That’s it except for AE who charges us a monthly fee to accept their cards. That’s why many places do not accept AE. Their transaction fees are higher as well. Once again who do you think pays for all that fine stuff and goodies you get from AE, or any other card?
    In the end we all do.

  31. 31
    Urza says:

    Here’s a silly question and great idea for some government overreach. Still need cash, but less of it after this. Why not have the government run the electronic transactions. All banks everywhere submit to the government standard. Visa, Amex, etc can stay around for the loan portion of what they do, but not for the money sucking vampirism part. I’m not knocking Dwolla, their costs are probably higher than Visa, but 25 cents is absolutely utterly ridiculous for what is essentially a datapacket being sent over the internet. One penny would be a thousand times the actual transaction cost, and wouldn’t even pay all the people that are part of that as servers not concerned with the transaction get to burn electricity to send that packet.

  32. 32
    draftmama says:

    We gave up using credit or debit cards three years ago when the economy crashed and our business went belly up. We simply cash our paychecks and checks we get for contract work, budget carefully and put the balance in the safe. Pays .5% less than the bank but oh well. Screw the banks. We do maintain a checking account with a local credit union for absolutely necessary payments, but I don’t want anyone knowing how much money we have – ain’t much but I wouldn’t give a penny to Visa/MC/AmEx – they stole so much from us when we had a thriving business I hope these guys put them out of business.

    The IRS we are scrupulously honest with but the rest of them can go suck eggs.

  33. 33
    Roger Moore says:

    @Urza:

    Why not have the government run the electronic transactions.

    It’s worth pointing out that the Fed already plays a role as a central clearinghouse for check transactions, so it’s not as though the government has never gotten involved in that kind of thing before. That said, I’m pretty sure the Republican answer will be no, or maybe “fuck no”. There’s no way they’ll accept a new system that takes away such a profit center from banks.

  34. 34
    Tom says:

    One of the problems with cash is that some smaller businesses hide it and don’t pay tax on it. Makes it harder for those of us not in that kind of business.

  35. 35
    David in NY says:

    @qtip:

    I hate being in line behind people paying with cash, it wastes my time.

    I believe this is totally a figment of advertising. Maybe advertising and ill-educatied cashiers, but mostly the former.

  36. 36
    Steeplejack says:

    @David in NY:

    As someone who works in retail, my opinion is that paying cash vs. paying with a card is a wash, time-wise, in the aggregate. For every customer who fumbles around for 41 cents so he can get back an even number of dollars in change, there is (at least) one customer who handles his credit/debit card as if he has never seen it before in his life and has to swipe it five times to get it to work.

    In an ideal world, a perfect card swipe with no signature is faster than a cash customer with correct change, but, believe me, over the course of a long, tedious, soul-crushing shift it all evens out. So if you are fourth or fifth in line to check out, it probably doesn’t matter how the customers ahead of you are paying. You’re going to wait about the same amount of time.

    The real assholes are people who insist on paying with a check.

    The other thing I have noticed is the high percentage of teenagers who wad up paper money and have to laboriously unpack it and sort it out to pay for anything. It’s like they came straight to the store after finding the bills in a mouse hole in the basement. Little balls of paper, literally. It’s not even efficient. What is so hard about folding money flat?!

  37. 37
    Ruckus says:

    @Steeplejack:
    What is so hard about folding money flat?!
    That’s what their parents do.

Comments are closed.