My third place is a small, old fashioned coffee shop in one of my favorite old buildings. It has tin ceilings, wide plank pine floors, and good broad band connectivity.
It is the essence of local community and welcomes customers of wealth, others not so wealthy, students, professors, and some folks variously challenged. It is a meeting place for local runners, Sunday morning newspaper readers, and women from the nearby all women’s gym.
The owner is a local man and his employees are mostly young folks at the “deciding” point in their lives and careers. They are deciding things like how to survive, where to live, what to do, and am I really in love with that person.
My town, they call it a city but that seems to me to be a bit of a stretch, is a college town. Many of the students come into the coffee shop. Lately, I have been noticing how many of them pay with credit or debit cards. While I cite the students, they are not exclusively the culprits.
The owner of the coffee shop, our merchant, must pay interchange fees on each of these transactions. In addition, there may be a commission due the credit card issuer of one to three percent. A merchant may choose to factor these fees into their costs and then price it into the product cost. This has the obvious effect of costing either the merchant or the customers money, which goes to the credit card company, which is, guess what, NOT a local company.
There are a number of parties in these transactions and only two are likely to be local. I suspect “my” coffee shop owner banks locally so he and his bank are local businesses. The customer may be local but their issuing bank sure isn’t. It is most likely a TBTF (to big to fail) institution and with consolidation there are fewer and fewer of these. In addition, there are: the credit card association (Master Card, Visa), the transaction network (they keep the records straight), possibly an affinity partner (a Sierra Club card), and a reseller (the organization who sells the service to the merchant).
That’s a lot of non local mouths to feed…
I used to have credit cards with AT&T, Sunoco, Shell, and Citibank. Now Citibank, the TBTF institution that needed to be bailed out in the recent fiasco, is behind all four of these. In business terms, I was diversifying. In big bank terms they have consolidated for efficiency. In the Oil companies case, they have outsourced. How did I, the customer, benefit from all of this consolidation and outsourcing? I haven’t. I have been hurt by no longer being diversified.
Some recent behaviors of these companies include: influencing the rewriting of the bankruptcy code to benefit them, bumping up on-time paying customer’s rates to rates in excess of 30%, increasing fees for all kinds of “bad” behaviors, and adding new fees wherever they can. They got congress to delay the “consumer protection” legislation so that they could make the changes necessary to avoid large losses.
How an institution that gets loans from the Federal Reserve at near zero interest and then lends it at over 30% can loose money should puzzle all of us. Actually, what they are doing is covering the huge losses they take in their often frivolous investing schemes. Does the term “collateralized debt obligation” ring a bell?
In my mind these “credit” products are no longer viable consumer products. The problem is we are addicted to them. Pay them off. Go to your local credit union for your car loan. Put your money, including your investment wealth, if you have any, in a local institution. Insist that they invest only in local businesses. Use cash or local currency like Berkshire Bucks, if you are lucky enough to live where it exists.
There is a Bank of America branch at the head of the square in my town. I would like to see them close.