The Economic Process

Recently my son told me that he was closing a checking account, one he had opened in college.  They were raising fees and the minimum balance to avoid the fees.  I told him that he could thank Congress and their consumer-protection efforts for placing new restrictions on credit cards and banks.  When they ban certain practices, the banks adjust, changing the rules of the game because bankers are a lot smarter than politicians when it comes to business and finance.

I refuse to believe (as the government apparently does) that we are not smart enough to protect ourselves by closing accounts, moving away from credit cards with the highest interest rates and forcing the banks to compete for our business.  Instead we have an elaborate dance between the banks and Washington, turning personal finance into a moving target and wasting time and money on all sides.

The economic process, the law of supply and demand along with corporations’ need to make a profit to stay in business, always have a way of circling around and finding the funding they need in our wallets.  No matter how people try to tinker, there is no magic money tree; you don’t get something for nothing.  Banks, insurance companies and other organizations can only get money by taking it from customers (in exchange for something we value).  When additional costs are imposed, they stay in business by figuring out how to get customers to pay for them.

Yesterday’s newspaper reported another regulation reducing the amount banks can charge retailers for credit card transactions.  Half way through the article was the statement:  “Banks have warned that they will make up the lost revenue by shifting costs to consumers.”   This is a no-brainer to those who understand the economic process, yet citizens keep looking to the government and government keeps getting credit for these well-meaning efforts.  The ones who are hurt the most are the ones who can least afford it, small customers who don't have those minimum balances.