When I chose to name my weekly column "Building Main Street, not Wall Street" I did so with the thought of providing information to small and medium-sized communities, communities that often lack the financial resources to climb the mountains that must be climbed to transform and revitalize. Occasionally, my topic will touch on universal methods that allow Wall Street to transfer dollars from any community to its bottom line -- this is one of those weeks.
Let's look at a great example of how Wall Street quietly extracts major dollars from every community around the country. Let me start by saying that if you bank locally, these funds typically remain local, benefiting your community. If you don't bank locally or regionally, these funds leave your community or region forever, never to return.
Let's start by using a typical $50 local transaction. When a consumer shops and makes a purchase with $50 in cash, he or she will receive $50 in goods. More importantly, the retailer likewise receives a full $50 from that transaction. In other words, everybody wins, and that full $50 remains within the community to be spent again and again.
On the other side of the coin, most of us also utilize credit cards. Many of us use them almost exclusively for the sake of convenience. Let's see how that shakes out when a consumer purchases that same item via a credit card.
The consumer will still receive that same $50 value from his purchase. The retailer, however, will receive approximately $46 or $47 because Wall Street has extracted its 3 to 4 percent credit card transaction fee. In essence, that community has lost 4 percent of every credit card transaction forever. Some will say this is but a small price to pay for the convenience. But, while convenience is great, don't be lulled into thinking that it is a small price.
As these credit card transactions increase, what happens to that $50? As the number of these transactions increases, after roughly 25 transactions, that entire $50 that was circulating throughout the community as cash is now completely wiped out through credit card fees, never to be seen in that community again. Imagine the amount of cash flowing out of every community in the county through a simple thing such as credit card fees. Of course, that only magnifies if one isn't paying off credit card debts each month. At that point, your community is losing those interest dollars -- that is another discussion for another day.
Don't take this the wrong way. It would be nearly impossible for many to forgo credit card usage; that is not the intent of this column. The intent is to make people aware of where their money is going and how that impacts the entire community. As with anything, moderation is the key. It is no different with your use of credit cards.
The point that needs to be made is that if you are banking with a Wall Street bank, you might want to reconsider your banking partner. By banking locally or even regionally, you are keeping those dollars within your local or regional community. Those dollars are then used to make home loans, auto loans -- and the list goes on -- to local customers spending local dollars with local businesses.
It is true that only one of us won't be able to change a community. It takes an army of people all rowing in the same direction to facilitate real change or transformation. The army need not all make major changes but if each of us makes some little changes, over time, all those little changes equal huge results. Start making little changes for a greater tomorrow.
-- John Newby is a nationally recognized columnist, speaker and publisher. He consults with communities, businesses, and media. His "Building Main Street, not Wall Street" column is enjoyed by more than communities around the country. As founder of Truly-Local, he assists community and business leaders in building synergies that create vibrant communities. He can be reached at [email protected] Opinions expressed are those of the author.