Editor’s note: This commentary is by John Bauer, of Waterbury, who is a writer and activist.
[D]on’t you just love your credit cards? You can use them everywhere, even for just a candy bar. For small purchases you don’t even have to sign your name.
Yep, just zip and go. Except now some have chips, so you have to wait. And sign. But that’s OK because it makes them safer. The banks are working hard to protect your money and to improve your life.
That last bit is a fairy tale, like, “Then she took a bite from the poison apple and fell into a deep sleep.” Banks do not protect your money. They skim it off the top, so you don’t notice.
My grandfather was a banker at the National Bank of Battle Creek. He proudly worked his way up from the mail room to vice president. He knew most everyone in town because he helped get them loans to buy homes and build businesses, often with a handshake.
That kind of banking no longer exists in most places. The National Bank of Battle Creek was bought by Comerica Inc. Wikipedia says that Comerica is among the 25 largest U.S. financial holding companies, with $70 billion in total assets, $49.5 billion in total loans, and $56.5 billion in total deposits as of June 30, 2016. In addition to Texas and Michigan, it has retail banking operations in Arizona, California and Florida, with select business operations in several other U.S. states, as well as in Canada and Mexico.
Personally, I like my grandfather’s way of banking, a system where community-based financial institutions considered who needs a loan and why, rather than just their income and credit score.
Yeah, they don’t have a lot of time for the needs of my grandfather’s neighbors in Battle Creek anymore, other than what they can get from them to feed their quarterly earnings report. Loans are standardized based on analytics. Money must be made to keep the stock price up so investors make money.
Personally, I like my grandfather’s way of banking, a system where community-based financial institutions considered who needs a loan and why, rather than just their income and credit score. Banking on a human scale that benefits the bank and the community. This is how it was done as late as the 1970s. The closest thing we have to that kind of banking are credit unions.
The first credit card, Diners Club, was issued in 1950. American Express in 1958. Visa 1966. MasterCard came later. It is not as if they were created on the eighth day.
It did not take long for banks to realize that a lot of money could be made with being the middleman in everyday transactions. They make money from fees (annual fees, over-the-limit fees, late fees, cash-advance fees) and interest on the balance you carry.
But wait, you say, “I don’t have an annual fee, I’m never late and I always pay off my balance. They’re not making money off of me!”
Nonsense. Merchants pay as much as 4 percent on every purchase. Even if you use a debit card. Credit card companies are also happy to sell your contact information to anyone who will buy it. It adds up to a lot of money.
How much? Total revenue for the credit card industry was almost $155 billion in 2011 and that was a bad year for the economy. In 2013 nearly 60 percent of all transactions were paid by debit and credit cards, according to the Federal Reserve. That’s a lot of you, me and the neighbor next door buying gas and groceries.
Now, imagine a different fairy tale, one where we start using cash instead of credit cards. Part of those billions of dollars would stop going to credit card companies and go into our pockets. It would go into the registers of our merchants. It would stay in our community instead of going to some bank in South Dakota.
We can take control of our economy one purchase at a time. Using cash will help change our system to one that provides a better life for our friends, families and communities.
