Short term short circuit

I guess members of Congress don't play chess. You know, developing a strategy, thinking several moves ahead, taking into account that every move you make will generate a counter move. The inevitability of that counter move apparently escaped Congress when they passed the financial reform bill with the Durbin amendment intact.

Durbin mandates the Federal Reserve to regulate debit card interchange. For those of you who have never heard of or do not understand interchange, it's a small, per transaction percentage charged merchants when bankcards are used to purchase products and services. A Fed report puts the average amount of interchange per transaction at $0.44.

The Fed's plan announced last week is to artificially cap interchange on debit cards (not credit cards) at $0.12. If the proposal is approved by the Fed, merchants will save money when customers use debit cards to make purchases, which will allow merchants to pass along savings to customers. Or that's what lawmakers and regulators think will happen -- end of the story.

But every action has a reaction. The reaction will likely be that banks (beneficiaries of interchange) will reduce or eliminate low-cost or free services on checking accounts, since debit card interchange helps to fund those programs. Because banks will start to charge fees on checking accounts to make up for the lack of interchange, people will stop using their debit cards as much.

If consumers shift from debit back to credit cards, merchants will start paying more credit card interchange, which is significantly higher than debit card interchange. And if consumers can't shift back to credit cards because they have bad credit, and they don't want to pull out those expensive-to-use debit cards, maybe they start to reduce (even more) their amount of shopping altogether.

So, an amendment designed to help merchants and consumers ends up costing merchants more than they already pay in interchange, causes consumers to spend less or go into greater debt with credit cards, and hinders economic growth.

If Congress plays any board game, it's checkers, not chess.    

   

Putting tech in its place

The software developer I interviewed a few weeks back seemed a little uncertain about me when I mentioned I don't own a smart phone. But it gets worse. Not only do I not own a smart phone, I don't own a cell phone with a wireless plan. I use a prepaid phone.

For someone who portrays himself as a tech writer, I can see why someone would have reservations. But the reason I don't own a smart phone is simple -- it wouldn't improve my life.

When I go for a walk, I don't need the ability to download MP3s and "friend" yet another stranger. When I drive my truck, I don't need wireless connectivity.  When I'm on a plane, I'd rather sleep. When I'm crossing the street, the last thing I want to be doing is surfing the Internet (California drivers can NEVER be trusted.)

Of course, there are downsides to my personal brand of Ludditism lite. I can't check e-mail on the fly and I can't use my phone to ignore other people in awkward social situations, like standing in line at the pharmacy and waiting for the movie to begin.

I am not saying I will never own a smart phone. It would be novel to play games on one or otherwise divert myself from the real world. But I prefer a slower pace of life. I access technology when I need to pay bills, write a blog, conduct research, communicate with friends and colleagues. So I ask myself, why do I need a smart phone?

Of course, I would think differently if I lived in the slums of Mumbai or in a tiny village in Malawi, where owning a smart phone might make the difference with that ultimate of applications -- survival.