New Debit Card Ruling

June 22, 2010

Senate and House members have agreed to slash the debit card fees that the banks charge to retailers and other business owners for accepting debit cards at their businesses. These fees ranged from 1%-2% of the cost of products sold by the merchants. Many of the larger retailers stand to gain several million doallrs per year as a result of this ruling. Walmart stands to gain the most as 17% of purchases are made with debit cards.

The banks are not happy and claim they may have to raise other fees to make up for the losses. An attorney for MasterCard states the losses may be passed on to the consumer. Currently, approximately 13.4% of all purchases are made with debit cards and pre-paid cards.

The Federal government will now monitor the fees costs and will be checking to make sure the fees are “reasonable and proportional to processing costs.” The following decisions were mandated by Congress:
Banks with over 10% in assets would be subject to fee oversight.

Government administered debit cards and reloadable prepayment cards would be exempt.
Merchants would be allowed to offer discounts for use of cash instead of debit.
Merchants could set a $10.00 minimum for card transactions.

It is questionable whether the banks would really stand to lose on this recent ruling because they are now stating that they may have to raise other fees to make up for their losses. The consumer stand to lose here as retailers and other merchants stand to gain. The retailers have joined to lobby Congress about credit card fees and have been fighting legislation for the last two years. They have a website which provides information on their stand on credit card fees and the action they are taking.

General Motors Corporation up for Initial Public Offering

June 11, 2010

General Motors is up for an initial public offering and this could be good news for the federal government which stands to gain back some of the bailout money it had extended to General Motors during the economic crisis. At present, the U. S. government owns 60.8% of the company. This initial public offering involves selling shares of stock to the public in order to raise more money. Morgan Stanly and JP Morgan Chase have expressed an interest in the offering.

This comes after General Motors reorganized the company and now shows signs of recovery after having lost money during the economic crisis of 2008, laying off workers, and taking outdated models off the market. President Obama ordered the company to downsize in view of its economic woes, after formerly enjoying a 51% market share.

General Motor’s problems began in 1962 when it failed to recognize the needs of the consumers and the Japanese were able to steal away some of its most loyal customers. It also failed to produce cars which were more economically suitable to customers in view of rising gas prices. GM”s strategic marking plan had failed.

Because of the Treasury Department’s involvement in this IPO, the GM underwriters will not make very much on this deal, as the U.S. may limit their fees. For any business owners who are involved in strategic planning for their companies, General Motors makes an excellent case study for the ramifications of marketing decisions and their effect on the company’s future.