06/20/2009 05:12 am ET | Updated May 25, 2011

Plastic Surgery

One Sunday, a family came in and said they had decided that during these really hard times for restaurants they would only support owner-operated places, figuring that the chains can always find a way to survive. They did an Internet search and came up with a list that, thankfully, included Ina's.

They also said they would not use a credit card at these places because they knew that the fees charged by the Big Three were enormous for a small operation.

It started me thinking that most people have no idea how credit cards really work and just how much they cost all of us.

From the CardReport Web site:

Visa and MasterCard are joint ventures -- or, as they call themselves, "associations" -- created, owned, governed and operated by and in the interests of their member banks. The Visa and MasterCard associations do not issue credit or debit cards directly. They are each collectively comprised of thousands of banks worldwide. These banks pay membership fees to the associations, and are thus permitted to issue cards.

American Express, Diners Club and Discover are not associations; each of these companies issues its cards directly, and maintains its own clearance network.

Because their memberships are virtually identical, the associations communicate frequently, exchange data and coordinate much of their activity through joint programs and consciously parallel activities.

Major banks and the Visa and MasterCard associations charge excessive "interchange fees" to retailers when customers pay for goods using a Visa or MasterCard.

Retailers have to pay the interchange fees in order to receive payments from transactions made using those cards, and these fees are disproportionately high compared to the money we receive from the transaction.

Did you know that retailers pay different interchange rates depending on the card you use-- personal, business, awards, your alma mater, debit, etc.? The statement we get once a month requires a degree in rocket science to decipher.

Did you know that debit cards "hold" money aside after a transaction for up to 48 hours? For example, you eat dinner at Ina's and the bill is $27.00. You go home, check your account and it clearly says your dinner at Ina's was $33.75. You know you left a cash tip, and so where did that $6.75 come from?

You call me and I explain that your card company sets aside up to 25 percent of the amount charged as a "just in case." Since we don't send the credit card transactions in to be cleared until the end of the day, perhaps, they think, you put a tip on the bill. But you didn't and it takes them 48 hours(!) to adjust your account back to the $27.00 you actually charged. Yes, they get to keep your $6.75 for two days.

So, let's see how this works for them. You pay interest, late fees, exceeding credit limit fees and sometimes an annual fee. (NOTE: The amount of money generated by penalty fees like late charges and exceeding credit limits had increased by about $1 billion annually in recent years, and should top $20 billion this year.)

I pay a lot of fees ($30,000+ per year) to accept the cards and have to wait 48 business hours to get MasterCard and Visa and 72 business hours to get American Express into my bank -- which can mean you charge a meal on Friday, and I don't see that money until the following THURSDAY! -- and more than 40,000 banks pay Visa and MasterCard a membership fee to "join" the associations.

Not my idea of a fair and balanced business exchange.

I propose a new way of thinking about transactions that is based on paying cash as a bridge to connect human beings in relationships of service.

When a 20-something comes in and wants to buy a cup of coffee with a debit card because there isn't a dollar in his or her pocket, it is clear that any insight into economic life has lost the intangible deeper social value, that buying and paying is an exchange of energy (i.e. I worked hard for this money and I pay you because you worked hard for the goods or services I am buying).

It is transparent, healthy and humane.

Paper money creates a direct and open dialogue and has different meanings and qualities when used for a gift, a loan or a purchase.

It was easy to see this crisis of spirit coming when the healthy balance of fear and greed on Wall Street disintegrated with deregulation taking away the fear and leaving only greed; when people decided that a corporate executive was worth 400 times more than the lowest-paid employee; when a company would not provide health care and retirement to the loyal workers but a million dollar renovation of a boardroom was seen as essential and appropriate.

That was not progress.

We all have wants and needs that come from feelings and desires. Deeds and actions must come from our will.

We must change our expectations and habits and decide how and where we spend our money ... our paper money.