I believe this is how to think through the bank fees to their logical end.
The “unknown variable” in this is consumer behavior. Namely are we prepared to “vote with our wallets?”
Here is how I believe this will go forward…
- The card “fees” were “baked in” before
- Consumers did not have a CLUE they were being charged; now they will through monthly charges
- Banks will “loosely collude” and try to stick monthly fees to users
- Consumer behavior will move towards much more use of cash (Dave Ramsey will love this and claim credit for it, maybe)
- These are “rational consumer” choices (hello Adam Smith’s invisible hand)
- Bad news for McDonalds (30% higher ticket when ccard is used) but great news for Treasury (Deluxe checks)
- People consume less when they use cash
- Standard of living is simplified (uh oh Walmart, Costco and discount retailers)
- Less consumer purchasing = more purchasing power
- More purchasing power = a mild offset to future inflation ahead as our debt deepens and inflationary pressures rise
If you need proof of this, look at the retailers’ articles on amping up cash reserves from “store to drawer.”
Retailers are also scrambling to find ways to provide “soft incentives” for using their credit cards card use; not because of the fee cap (though they are cheering that as a HUGE windfall) but because people “spend more on plastic.”
So who wins and who loses really if consumers in fact, do, vote with their wallets (along with public opinion and far superior to individual voting) and begin to use a lot more cash.
99% Price Sensitive Consumers 1% Non-Price Sensitive Consumers
The banks are betting consumers will accept the fee and not change behavior. 40,000 people marching in 9 cities makes me believe there is a chance people will change.
The big banks may be the Smartest Guys in the room; but that is a small room and getting smaller by the day.