Credit or Debit? Not Just an Annoying Question
I don't think Visa and MasterCard wanted me in their focus group, but then they probably don't want me in their country either. They practically write bills for Congress, such as the bankruptcy bill that might be voted on this month, and yet they still seem to want to know what people think. Either that, or they're doing "push polling" - five of the eight people in the focus group I was part of on September 5 worked for Congress members, at least one of them for a member on the House Financial Services Committee. Maybe the credit card companies, whom I strongly suspect to have been the client behind this focus group, were trying to push their viewpoint on Congressional staff more than they were trying to gauge the pulse of the nation.
But what was I doing there? I've never had a credit card and don't plan to. I told them I thought credit card companies were predators. I suggested that some of the questions were intended to reduce us to infants. I objected to various hidden assumptions, described the test message as dishonest and evil, and took my hundred dollar bill and left, unlikely -- I'd guess -- to become a regular.
It's the only focus group I've ever been asked to be part of. I was asked because I work for a nonprofit that deals with banking issues among other things. I went because I wanted the $100 and because I wanted to see what a focus group does. I'd heard that they could be used as a tool for crafting a decent message into its most appealing form or for simply determining what messages were marketable at all. I concluded that these groups are at least sometimes used for trying to determine the best way to sell people something that's bad for them.
We sat around a table in a brightly lit room with a middle-aged woman at the head of the table, her back to a huge mirror. Behind the mirror was an observation room, a video camera, and audio tape equipment. In front of each participant was a dial with which to give numerical answers to questions. In a far corner, away from the mirror, was a guy at a computer recording these responses. Much of the two hours (8 p.m. to 10 p.m.) was spent giving oral answers to questions. At various times, we had to silently answer a number of questions with our dials, sometimes picking 1 for yes or 2 for no, sometimes giving a number between one and a hundred to rate our affection for a particular industry, etc.
After various general questions about credit cards and debit cards, she asked us which we would prefer, scenario A or B. In A, when you made a purchase at a store with a debit card you would have to sign a slip of paper, you could earn frequent flyer miles, you could win various prizes, you would not be liable for unauthorized use if your card was stolen, and you would not be charged a fee, but you could not get cash back. In B, you would enter a PIN rather than signing, you would not earn any miles or win any prizes, you would be liable for unauthorized use, you might be charged a fee for making the purchase, and you could get cash back. Everyone, including me, said they would prefer A. Almost everyone said the main reason was not wanting to be charged a fee. That was my exclusive reason. I find the miles and prizes offensive.
She then gave us each a copy of a newspaper article to read. It was from the July 31, 2002, Charlotte Observer and discussed a class-action lawsuit that will go to trial in April. The plaintiffs are Wal-Mart, Sears, Circuit City, and other retailers. The defendants are Visa and MasterCard. Retailers have to pay on average four times the fee for processing debit-card purchases when customers sign, as compared to when they use their PIN. The bigger fee goes to Visa and MasterCard, whichever company's name is on the check card. These companies are currently able to force retailers that accept credit cards to also accept debit cards with a signature rather than a PIN. The retailers are suing for the ability to not offer that option and to require that any debit card purchase be made with a PIN. Interestingly, the Observer article pointed out that many banks are not charging any fees for the PIN method, and at least one is offering flyer mileage.
Our focus group leader claimed that her A and B scenarios exist now and correspond to the choice between signing and using a PIN. And she tried to tell us that being able to sign was an important matter of consumer choice. There were a number of problems with these claims. First, as noted, using the PIN does not have to mean paying a fee. Second, the question of liability for unauthorized use is a distinction between credit cards and debit cards, not which use you make of your debit card. Third, the descriptions of the scenarios had completely left out consideration of how the choice affected transactions between retailers and banks. (I would rather pay a fee to a local bank - or no fee at all -- than pay a higher price at the store so that the store can pay a fee to Visa and MasterCard.) Fourth, which of the two methods (signing or pushing four numbers) gets to claim the banner of consumer choice is meaningless, and I really don't give a crap whether I have to sign or push buttons. The question is about as annoying to me as "Paper or Plastic?"
I sincerely hope I gummed up their focusing process. While three out of eight people did say they thought being able to sign was an important matter of liberty (and one called it a "civil liberties issue") even after I'd said the question reduced us to infants, four other people did NOT say they cared about this matter of "choice". A number of people agreed with me that credit card companies were predators and already possessed way too much money. And a couple of people agreed with me that the consumer-friendly solution would be for the federal government to regulate this mess rather than leave our social policy in the hands of the lawyers of the credit card companies versus the lawyers of Wal-Mart. That seems to me a recipe for putting us all deeply in debt and in possession of third-rate merchandise.