Abstract (50 page report): "This paper presents a model for the credit card industry, where oligopolistic card networks price their products in a complex marketplace with competing payment instruments, rational consumers/merchants, and competitive card issuers/acquirers. The analysis suggests that card networks demand higher interchange fees to maximize card issuers' profits as card payments become more efficient. At equilibrium, consumer rewards and card transaction volume also increase, while consumer surplus and merchant profits may not. The model provides a unified framework to evaluate credit card industry performance and government interventions."
[Source: Via Federal Reserve Bank of Kansas City]
Friday, December 22, 2006
Tuesday, December 19, 2006
Saturday, December 16, 2006
Advisory
Mitch Goldstone, President of 30 Minute Photos Etc. is scheduled to address the International Consumer Electronics Show in Las Vegas on January 9, 2007.
Click here for session details.
MasterCard's® Planned Interchange Fee Cap For Gas Retailers (WayTooHigh.com)
The news last September seemed monumental, but what happened since the press release?
Whatever happened to the heralded announcement by MasterCard Worldwide® of their response to growing scrutiny of windfall profiteering at the gas pumps? Did Visa® ever follow along too?
From news reports, the second largest card association was planning to limit interchange fees for U.S. gas purchases. Overseas, we see that the company is also planning to lower rates by 60% for debit card transactions, and in the States, sort of lower rates at the pumps too. All this helps demonstrate that interchange fees are way too high.
According to Digital Transactions (Sept 5, 2006) "while the announcement gives no specific effective date for the cap on gasoline interchange, a MasterCard spokesman says the drop-dead date is April 1, 2007."
We wonder what might occur should there be another energy pricing crisis in the States and should gas prices rise again, how will MasterCard respond? Will they hold the cap at $50? Either way, the gimmick is still irrelevant and disconnected from the reality that most motorists' gas tanks cannot hold more than $50 anyway.
Out of Touch (WayTooHigh.com)
"MasterCard Initiative: Priceless?" (Convenience Store News)
"MasterCard Offers Concessions In Interchange Fee Battle" (ConsumerAffairs.com)
"MasterCard Says to Disclose More Merchant Fees" (via Reuters)
[Commentary: WayTooHigh.com]
Whatever happened to the heralded announcement by MasterCard Worldwide® of their response to growing scrutiny of windfall profiteering at the gas pumps? Did Visa® ever follow along too?
From news reports, the second largest card association was planning to limit interchange fees for U.S. gas purchases. Overseas, we see that the company is also planning to lower rates by 60% for debit card transactions, and in the States, sort of lower rates at the pumps too. All this helps demonstrate that interchange fees are way too high.
According to Digital Transactions (Sept 5, 2006) "while the announcement gives no specific effective date for the cap on gasoline interchange, a MasterCard spokesman says the drop-dead date is April 1, 2007."
We wonder what might occur should there be another energy pricing crisis in the States and should gas prices rise again, how will MasterCard respond? Will they hold the cap at $50? Either way, the gimmick is still irrelevant and disconnected from the reality that most motorists' gas tanks cannot hold more than $50 anyway.
Out of Touch (WayTooHigh.com)
"MasterCard Initiative: Priceless?" (Convenience Store News)
"MasterCard Offers Concessions In Interchange Fee Battle" (ConsumerAffairs.com)
"MasterCard Says to Disclose More Merchant Fees" (via Reuters)
[Commentary: WayTooHigh.com]
Thursday, December 14, 2006
Why Credit Card's Can Be Scrooges During The Holidays (commentary: WayTooHigh.com)
Actually, the charge card associations and their member banks can be scrooges year-round, according how we interpret "The 12 Ways of Giving" Motley Fool profile today.
As Dan Caplinger for TMF (Dec 14) reported, during the holiday season it can be particular oppressive to non-profit charitable organizations which accept electronic payment donations. They can pay upwards of 5% in interchange fees when benevolent donors present their cards.
TMF Abstract: "...Keep your credit card in your wallet. Many charities accept donations by credit card in order to facilitate giving by donors. However, keep in mind that charities usually have to pay the resulting merchant interchange fees, which can be as high as 5%. Of course, using a credit card to give is better than not giving at all, but better still is a gift by cash or check."
Click here for a recent WTH commentary on how the banks can charge non-profits upwards of 5% to process electronic payments.
[Source: Commentary, WayTooHigh.com, via The Motley Fool]
As Dan Caplinger for TMF (Dec 14) reported, during the holiday season it can be particular oppressive to non-profit charitable organizations which accept electronic payment donations. They can pay upwards of 5% in interchange fees when benevolent donors present their cards.
TMF Abstract: "...Keep your credit card in your wallet. Many charities accept donations by credit card in order to facilitate giving by donors. However, keep in mind that charities usually have to pay the resulting merchant interchange fees, which can be as high as 5%. Of course, using a credit card to give is better than not giving at all, but better still is a gift by cash or check."
Click here for a recent WTH commentary on how the banks can charge non-profits upwards of 5% to process electronic payments.
[Source: Commentary, WayTooHigh.com, via The Motley Fool]
Wednesday, December 13, 2006
Anatomy of How Technology Should Reduce Costs (commentary: WayTooHigh.com)
With the holiday retail season upon us, millions of retailers are experiencing a similar scenario. Technology has created new opportunities to enhance service, speed and product offerings while significantly lowering prices. While lowering our prices, we pay more in interchange fees, which translates into a $30 billion annual hidden tax on retailers and consumers.
The below two examples can parallel similar experiences from other retailers in many other industries too. Next month, we will be addessing technology issues at the International Consumer Electronics Show in Las Vegas.
$5.00 PHOTO SCANNING NOW JUST 5-CENTS
At 30 Minute Photos Etc., we charged $5.00 to scan a picture; today it is as low as 5-cents - pay just $49.95 to scan a shoe box of photos (up to 1,000 snapshots) and the orders are completed in minutes. After a Popular Photography article on our business (July, 2006, "Scanning made cheap and easy - Got Prints?"), orders are now mailed from across the country or literally wheeled into our retail store in Orange County, Calif. One customer brought in 19,000 pictures on a Saturday and picked it up Monday morning. That is technology and efficiency for you!
PHOTO GREETING CARDS ARE READY IN MINUTES AND COSTS A FRACTION OF THE LABOR AND PRICE FROM JUST A FEW YEARS AGO
Another example of how technology has created new opportunities for retailers and saved money and hassles for consumers are holiday photo greeting cards. In 1990, when we founded the company, we had nearly a 50% waste ratio to design and prepare a photo greeting card. Orders were ready a few days later and the cost was about 5 times today's rate. Today, with orders coming in from across the country and at retail on our photo kiosks, the wait time is minutes. The waste factor is zero - unless someone misspells a name on the card. The quality from 16-years ago to today is embarrassing; back then, there was a huge error rate - today, every order is extraordinary.
With completed orders being mailed back nationwide within minutes, the price is also something to note. Today the photo greeting cards are as low as 38-cents.
Partly because we provide special services to military families, this is among our customers' most popular photo greeting card designs this year.
[Holiday Photo Greeting Card Sample from 30 Minute Photos Etc.]
This posting is not designed to be commercial, but informative and explain how technology is speeding up everything and lowering the costs .... except seemingly for merchant interchange rates. Keep in mind, our business is not part of a giant cartel with 80% market power and unbridled control. We have lots of competition, and while we use technology to create new efficiencies, products and lower prices, the credit card associations are continuing to raise rates. While they just announced a planned 60% reduction for debit card use in 2008 overseas, our rates regularly climb.
If technology is helping to lower the costs of business, why are the card associations continuing to raise their rates while also adding new schemes to force merchants to pay more.
[commentary: WayTooHigh.com]
Tuesday, December 12, 2006
Seven Dollars vs. 55-cents (WayTooHigh.com)
This afternoon, a customer's order at our Orange County, Calif retail photo center totaled $398.19 and they presented their Visa® debit card. Twice it was not accepted. The transaction failed.
Why?
We understand that many ATM cards have a daily usage limit of $300. So, rather than creating a hassle, we immediately reswiped the card as a signature credit card. However, the customer was concerned - they knew there were adequate funds available and it was an embarrassing and uncomfortable situation. She even mentioned that retailers pay a higher fee for credit cards even though funds are immediately withdrawn from the cardholders bank account. [Little did she know we are the lead plaintiff in the merchant interchange antitrust litigation and co-edit WayTooHigh.com - The Credit Card Interchange Report].
Doing a little math proved her right. Rather than costing 30 Minute Photos Etc. a flat fee of 55-cents to process the PIN-based ATM card transaction as a debit card, our actual interchange payment cost was closer to $7.00.
Even if a customer has thousands of dollars in the bank, retailers are forced to pay higher signature-based interchange fees.
[WayTooHigh.com]
Why?
We understand that many ATM cards have a daily usage limit of $300. So, rather than creating a hassle, we immediately reswiped the card as a signature credit card. However, the customer was concerned - they knew there were adequate funds available and it was an embarrassing and uncomfortable situation. She even mentioned that retailers pay a higher fee for credit cards even though funds are immediately withdrawn from the cardholders bank account. [Little did she know we are the lead plaintiff in the merchant interchange antitrust litigation and co-edit WayTooHigh.com - The Credit Card Interchange Report].
Doing a little math proved her right. Rather than costing 30 Minute Photos Etc. a flat fee of 55-cents to process the PIN-based ATM card transaction as a debit card, our actual interchange payment cost was closer to $7.00.
Even if a customer has thousands of dollars in the bank, retailers are forced to pay higher signature-based interchange fees.
[WayTooHigh.com]
"Santa’s Not the Only Surprise This Season" (NACS)
ALEXANDRIA, VA – With all the hidden credit card fees that must be paid, a modern version of the popular Christmas tune the “The Twelve Days of Christmas” should be renamed the 12 “daze” of Christmas.
For instance, PNC Financial Services Group’s annual Christmas Price Index that calculates giving true loves every item in the cherished “Twelve Days of Christmas” – from 12 drummers drumming to a partridge in a pear tree – would cost more than $75,000 in 2006. However, the bank conveniently leaves out the hidden cost of credit card interchange fee that consumers pay, which adds upwards of $1,500 to this fabled purchase.
Interchange is a percentage of each transaction that Visa and MasterCard banks collect from merchants every time their credit or debit cards are used to pay for a purchase. The fee varies with type of merchant, transaction and card, but averages close to 2 percent for most credit card transactions.
In 2005, U.S. consumers paid more than $30 billion in interchange fees when using MasterCard or Visa cards, double the amount they paid in ATM and late fees combined.
Shockingly, interchange rates vary significantly by country, and U.S. rates are among the highest in the world, despite having the most-advanced technology infrastructure to process transactions. For instance, in the United Kingdom, consumers hoping to play “Father Christmas” pay interchange rates roughly half of those in the United States.
“The Grinch can’t hold a candle to the credit card companies,” said NACS Vice President of Government Relations Lyle Beckwith. NACS is a founding member of the Merchants Payments Coalition (MPC), a group of about 20 trade associations representing the retail community that is fighting for a more competitive and transparent card system that works better for consumers and merchants alike.
The cost of items referenced in “The Twelve Days of Christmas” increased about 3 percent over the past year, according to the PNC survey, while interchange fees increased at a rate nearly six times greater – 17 percent, according to the MPC.
“It is outrageous how much Visa and MasterCard and their member banks are needlessly saddling consumers with these hidden fees that grow every year,” added Beckwith. “Among other things, these fees are fueling the flood of ‘pre-approved’ credit card come-ons stuffing consumers’ mailboxes, and making shredders a popular Christmas gift for consumers concerned about identity theft.”
“Visa and MasterCard rules effectively require that interchange be built into prices and make cash discounts all but impossible, so these fees take money out of consumers’ pockets regardless of how they pay,” Beckwith added.
Given Visa and MasterCard’s refusal to fully disclose operating rules that govern interchange, Beckwith added one hope: “Perhaps these credit card companies’ resolution for 2007 should be that they provide greater transparency as to why U.S. consumers pay more than $30 billion a year in interchange fees, lining the companies’ pockets and funding everything from junk mail to marketing gimmicks that benefit neither consumers nor retailers.”
NACS, the association for convenience and petroleum retailing, is an international trade association representing more than 2,200 retail and 1,800 supplier member companies. The U.S. convenience store industry, with over 140,600 stores across the country, posted $495.3 billion in total sales in 2005, with $344.2 billion in motor fuels sales.
[Source: National Association of Convenience Stores]
For instance, PNC Financial Services Group’s annual Christmas Price Index that calculates giving true loves every item in the cherished “Twelve Days of Christmas” – from 12 drummers drumming to a partridge in a pear tree – would cost more than $75,000 in 2006. However, the bank conveniently leaves out the hidden cost of credit card interchange fee that consumers pay, which adds upwards of $1,500 to this fabled purchase.
Interchange is a percentage of each transaction that Visa and MasterCard banks collect from merchants every time their credit or debit cards are used to pay for a purchase. The fee varies with type of merchant, transaction and card, but averages close to 2 percent for most credit card transactions.
In 2005, U.S. consumers paid more than $30 billion in interchange fees when using MasterCard or Visa cards, double the amount they paid in ATM and late fees combined.
Shockingly, interchange rates vary significantly by country, and U.S. rates are among the highest in the world, despite having the most-advanced technology infrastructure to process transactions. For instance, in the United Kingdom, consumers hoping to play “Father Christmas” pay interchange rates roughly half of those in the United States.
“The Grinch can’t hold a candle to the credit card companies,” said NACS Vice President of Government Relations Lyle Beckwith. NACS is a founding member of the Merchants Payments Coalition (MPC), a group of about 20 trade associations representing the retail community that is fighting for a more competitive and transparent card system that works better for consumers and merchants alike.
The cost of items referenced in “The Twelve Days of Christmas” increased about 3 percent over the past year, according to the PNC survey, while interchange fees increased at a rate nearly six times greater – 17 percent, according to the MPC.
“It is outrageous how much Visa and MasterCard and their member banks are needlessly saddling consumers with these hidden fees that grow every year,” added Beckwith. “Among other things, these fees are fueling the flood of ‘pre-approved’ credit card come-ons stuffing consumers’ mailboxes, and making shredders a popular Christmas gift for consumers concerned about identity theft.”
“Visa and MasterCard rules effectively require that interchange be built into prices and make cash discounts all but impossible, so these fees take money out of consumers’ pockets regardless of how they pay,” Beckwith added.
Given Visa and MasterCard’s refusal to fully disclose operating rules that govern interchange, Beckwith added one hope: “Perhaps these credit card companies’ resolution for 2007 should be that they provide greater transparency as to why U.S. consumers pay more than $30 billion a year in interchange fees, lining the companies’ pockets and funding everything from junk mail to marketing gimmicks that benefit neither consumers nor retailers.”
NACS, the association for convenience and petroleum retailing, is an international trade association representing more than 2,200 retail and 1,800 supplier member companies. The U.S. convenience store industry, with over 140,600 stores across the country, posted $495.3 billion in total sales in 2005, with $344.2 billion in motor fuels sales.
[Source: National Association of Convenience Stores]
The National Restaurant Association will release its 2007 Restaurant Industry Forecast today at the National Press Club in Washington, D.C. The association will outline policy issues such as credit card interchange fees.
Watch the Webcast live! on 12/12/06 at 10 AM EST.
{Source: via National Restaurant Association, U.S. Newswire release]
Watch the Webcast live! on 12/12/06 at 10 AM EST.
{Source: via National Restaurant Association, U.S. Newswire release]
Monday, December 11, 2006
More U.S. Cities in Interchangeable Parking Jam (WayTooHigh.com)
While New Hampshire and Massachusetts are facing parking meter quagmires, California has credit card accepting meters already in place.
Last weekend, while on the Sunset Strip in West Hollywood, we noticed that the famed landmark street was shadowed by Visa® and MasterCard® accepting parking meters. For as little as 25-cents you can rent a space for 15 minutes on The Strip. We wonder whether West Hollywood knows what Boston and Manchester N.H. understand about how interchange fees eat into their revenues?
[photo caption: Charge card accepting parking meter on the Sunset Strip, Saturday, Dec 9, - WayTooHigh.com]
For typical merchants,
the minimum charge / debit card fee on a 25-cent transaction could be nearly the entire amount and in other cases much, much higher. Did the 15-minutes of fame our car experienced on the Sunset Strip end up costing the municipality while helping to enrich the banks and card associations?
The Canadian-based company name imprinted on the back of the receipt (left) is Digital Payment Technologies. We visited their website but could not find any information on how municipalities are handling the interchange fees or what those fees are expected to be for micro-transactions.
New Hampshire Parking Meters Accept Plastic (via Union Leader)
"[Boston] Halts Use of Credit Cards at New Meters" (via The Boston Globe)
Boston Strangled by Interchange Rules (WayTooHigh.com)
[Source: WayTooHigh.com]
Global Interchange Fee Perceptions (WayTooHigh.com)
The Sydney Morning Herald's headline (Dec 11) "Credit card firms slam RBA review" suggests that the Reserve Bank of Australia's decision to review interchange fees is "unbalanced." Right they are. If one on hand, MasterCard Europe® can announce plans to lower rates on debit cards by 60%, why then is the giant card association fighting another nation's eagerness to have equal balance and demand these fees be cost-based?
Background:
[Source: WayTooHigh.com via Sydney Morning Herald]
Background:
- Sixty-percent Rate Cut in 2008 by MasterCard Europe (Commentary, WayTooHigh.com, via WSJ)
- "MasterCard Europe reportedly said that it would lower debit card transaction fees by 60 percent in 2008, as the Single Europe Payments Area regulations kick in. European regulators are still investigating if the payments company had violated antitrust laws by setting interchange fees for cross border debit card transactions." [The Asian Banker]
[Source: WayTooHigh.com via Sydney Morning Herald]
Sunday, December 10, 2006
Retailers Taken on Frequent Flyer Ride (*WayTooHigh.com)
Recent merchant interchange fee increases were linked to frequent flyer reward card programs. The rates were increased when cardholders used their affinity frequent flyer-linked cards.
However, if you are late paying a single monthly credit card bill, the card company can confiscate all your accumulated frequent flyer mileage accrued on your account
The question?
Even though merchants are paying more when honoring affinity reward cards, if the cardholder is forced to return all the mileage, does this mean that the business gets a refund too? Alter all, we paid a premium and if the cardholder is precluded from using those miles, shouldn't the retailers get a refund?
The inequity does not end with affinity cards. Just this past weekend, during a hotel visit, a credit was issued to our account for certain charges. a refund for the taxes were applied, but when merchants issue credits on a charge card, their are no interchange fee refunds.
Example: If a furniture store sells a $10,000 living room set and the customer returns it, the retailer is forced to still pay the interchange fee even though the items were returned. Forget "restocking" costs, how about interchange fee costs on returns, especially during the holiday season.
[Source: WayTooHigh.com]
However, if you are late paying a single monthly credit card bill, the card company can confiscate all your accumulated frequent flyer mileage accrued on your account
The question?
Even though merchants are paying more when honoring affinity reward cards, if the cardholder is forced to return all the mileage, does this mean that the business gets a refund too? Alter all, we paid a premium and if the cardholder is precluded from using those miles, shouldn't the retailers get a refund?
The inequity does not end with affinity cards. Just this past weekend, during a hotel visit, a credit was issued to our account for certain charges. a refund for the taxes were applied, but when merchants issue credits on a charge card, their are no interchange fee refunds.
Example: If a furniture store sells a $10,000 living room set and the customer returns it, the retailer is forced to still pay the interchange fee even though the items were returned. Forget "restocking" costs, how about interchange fee costs on returns, especially during the holiday season.
[Source: WayTooHigh.com]
Wednesday, December 06, 2006
"Dreamgirls" Dream-on (WayTooHigh.com)
Not sure if our international readers will understand this, but, in the States, the biggest theatrical release this holiday season will be Dreamgirls. Within the next few weeks all the buzz will be swarming around this film. The story is about the price people pay for fame. We only hope they are not charging it to reach their glory because the dream can become a nightmare.
Earlier today we read a commentary [Albany Times Union] about how "interchange fees are transparent to merchants." Just the headline seemed to be wishful thinking.
Transparent?
Merchants and cardholders have little or no idea that this is a $30 billion dollar windfall that the banks and the two leading card associations have been controlling for decades. If they want "transparency" post the exact charge on every cardholders receipt.
The head of this one-year old advocacy group [supported by the banks, payment card networks - (i.e. Visa & MastercCard?) and their trade associations] explained that "merchants receive extraordinary benefits from accepting electronic payments." This might have been news if the commentary was authored by a retailer, but, by their Washington, D.C. policy and advocacy tool. And for all that money, we would have thought Mr. Madigan could have garnered greater pickup for his "commentary" than having it appear in an Albany, NY paper.
We wonder whether a similar editorial was published in the late 1800's when the railroad cartel forced farmers to pay whatever rates they imposed for the benefits derived from transporting their goods to market. Without the railroads carrying their goods to market they would have been out of business - the produce would have rotted.
Today, Visa® and MasterCard® control a staggering 80% monopolistic share of the electronic payment market. Their market power parallels the characteristics of the railroads which also stood accused of forcing secret price agreements to control their market.
Fast forward to today: because we have been invited to address the International Consumer Electronics Show next month in Las Vegas, we think this forum [the largest trade show in the U.S.] will be an ideal venue to learn just how transparent interchange fees are. January 9th and our panel discussion boasts an ideal opportunity to spotlight why retailers and consumers are battling Visa and MasterCard.
[Commentary: WayTooHigh.com]
Earlier today we read a commentary [Albany Times Union] about how "interchange fees are transparent to merchants." Just the headline seemed to be wishful thinking.
Transparent?
Merchants and cardholders have little or no idea that this is a $30 billion dollar windfall that the banks and the two leading card associations have been controlling for decades. If they want "transparency" post the exact charge on every cardholders receipt.
The head of this one-year old advocacy group [supported by the banks, payment card networks - (i.e. Visa & MastercCard?) and their trade associations] explained that "merchants receive extraordinary benefits from accepting electronic payments." This might have been news if the commentary was authored by a retailer, but, by their Washington, D.C. policy and advocacy tool. And for all that money, we would have thought Mr. Madigan could have garnered greater pickup for his "commentary" than having it appear in an Albany, NY paper.
We wonder whether a similar editorial was published in the late 1800's when the railroad cartel forced farmers to pay whatever rates they imposed for the benefits derived from transporting their goods to market. Without the railroads carrying their goods to market they would have been out of business - the produce would have rotted.
Today, Visa® and MasterCard® control a staggering 80% monopolistic share of the electronic payment market. Their market power parallels the characteristics of the railroads which also stood accused of forcing secret price agreements to control their market.
Fast forward to today: because we have been invited to address the International Consumer Electronics Show next month in Las Vegas, we think this forum [the largest trade show in the U.S.] will be an ideal venue to learn just how transparent interchange fees are. January 9th and our panel discussion boasts an ideal opportunity to spotlight why retailers and consumers are battling Visa and MasterCard.
[Commentary: WayTooHigh.com]
Tuesday, December 05, 2006
Credit Card Branding Confusion (WayTooHigh.com)
With the holiday retail season in full swing, some newly co-branded Visa® and MasterCard's® are a giant headache for retailers. Just today, one of our retail photo customers presented us with her credit card. It was a store card from Gap Inc. and the electronic processing terminal declined the transaction. The customer then presented us with her Nordstrom's card, which did have a Visa imprint on the front. Without close inspection, it was challenging to differenciate the two.
Why is this important?
While the Gap card was without interchange charges, the Nordstrom's Visa co-branded card cost us the signature interchange rate.
Even Cardholders are Perplexed by Debit vs. Credit Cards (WayTooHigh.com)
[Commentary: WayTooHigh.com]
Why is this important?
While the Gap card was without interchange charges, the Nordstrom's Visa co-branded card cost us the signature interchange rate.
Even Cardholders are Perplexed by Debit vs. Credit Cards (WayTooHigh.com)
[Commentary: WayTooHigh.com]
Sixty-percent Rate Cut in 2008 by MasterCard Europe (Commentary, WayTooHigh.com, via WSJ)
Those are some rich margins!
Imagine if you owned a retail shop and announced that you were slashing prices by 60 percent? It would mean one of two things; either your merchandise did not sell during the holiday season, or you are preparing to close shop. In the case of MasterCard Europe®, their announced 60% interchange fee reduction on Maestro® debit card payments made in the euro zone certainly does not suggest a weakened company. Instead, it enhances the argument that interchange fees currently are way too high. They are way too high in Europe, they are way to high in Asia, they are way too high in Australia. They are way too high across the globe, especially in the U.S., which faces among the steepest interchange fees for any leading industrialized nation.
However, before consumers and merchants in Europe prepare to celebrate, according to The Wall Street Journal Reporter, Anne Jolis, the lowered bank fees are more than a year away.
How many more billions will be generated until the fee reduction takes hold in January 2008?
Why the delay of a year?
Imagine if you owned a retail shop and announced that you were slashing prices by 60 percent? It would mean one of two things; either your merchandise did not sell during the holiday season, or you are preparing to close shop. In the case of MasterCard Europe®, their announced 60% interchange fee reduction on Maestro® debit card payments made in the euro zone certainly does not suggest a weakened company. Instead, it enhances the argument that interchange fees currently are way too high. They are way too high in Europe, they are way to high in Asia, they are way too high in Australia. They are way too high across the globe, especially in the U.S., which faces among the steepest interchange fees for any leading industrialized nation.
However, before consumers and merchants in Europe prepare to celebrate, according to The Wall Street Journal Reporter, Anne Jolis, the lowered bank fees are more than a year away.
How many more billions will be generated until the fee reduction takes hold in January 2008?
Why the delay of a year?
We assume that Visa International's® legal and public relations teams are speedily preparing a similar announcement as both card associations share many of the same member banks.
With no PIN-based debit card interchange fees in Canada, it seems that MasterCard has room for enhancing the rate reduction by another 40 percent.
If the gas companies can lower and raise prices at the pump with the flick of a switch, the banking cartel surely can lower rates now. Why wait until 2008?
Why cut interchange fees by 60% only on debit-cards and not on credit cards? Remember, MasterCard and Visa® encourage cardholders to posses debit cards, but use it at the much higher interchange fee structure that accompanies credit cards in order to validate their sweepstakes and other contest schemes.
Does this mean that MasterCard Europe will spend the next year encouraging those with debit cards to instead use the cards as traditional credit cards and thus bill merchants at the much higher rates?
And, the biggest question: Why only cut debit card fees by 60 percent in Europe?
We sense this appeasing concession by MasterCard Europe is designed to partly placate the expected ruling by the European Commission. While MasterCard Europe's white flag is hoisted in the air, the two leading card associations' alleged price-fixing transgressions have already occurred. Moving forward, this is a nice first step, but their pricing scheme and restraints on competition have a long history of alleged antitrust violations.
As reported in The Wall Street Journal (Dec 5, Page E2), "The commission says MasterCard Europe and its Maestro debit card account for about 45% of all payment cards issued in Europe. In 2004, a total of 23 billion payments, with a value of €1.35 trillion, were made in the EU with credit and debit cards."
[Commentary: WayTooHigh.com, via WSJ]
Monday, December 04, 2006
New Hampshire Parking Meters Accept Plastic (via Union Leader)
Last month, Boston, now Manchester, NH.
According to the Union Leader, new parking [kiosk] meters in Manchester N.H. are accepting Visa® and MasterCard® electronic payments for as little as a nickel's worth of leased space for your car - six minutes at the meter. From what we gleaned, the city might have wanted to imposed a one-dollar minimum for electronic payments. However, it seems that the recent parking meter fiasco in Boston - where they also abandoned plans for enforcing that minimum charge card limit has now been imposed.
What happens when a motorist enters their Visa card so they can run into the corner shop for just a minute? The Union Leader reported that "[the] transaction processing fees have been reported to be as high as 18 cents on the dollar." How can the city recoup its nearly million-dollar investment after the fees to Visa and MasterCard are paid?
"[Boston] Halts Use of Credit Cards at New Meters" (via The Boston Globe)
Boston Strangled by Interchange Rules (WayTooHigh.com)
[Source: WayTooHigh.com via Union Leader, Dec 4]
According to the Union Leader, new parking [kiosk] meters in Manchester N.H. are accepting Visa® and MasterCard® electronic payments for as little as a nickel's worth of leased space for your car - six minutes at the meter. From what we gleaned, the city might have wanted to imposed a one-dollar minimum for electronic payments. However, it seems that the recent parking meter fiasco in Boston - where they also abandoned plans for enforcing that minimum charge card limit has now been imposed.
What happens when a motorist enters their Visa card so they can run into the corner shop for just a minute? The Union Leader reported that "[the] transaction processing fees have been reported to be as high as 18 cents on the dollar." How can the city recoup its nearly million-dollar investment after the fees to Visa and MasterCard are paid?
"[Boston] Halts Use of Credit Cards at New Meters" (via The Boston Globe)
Boston Strangled by Interchange Rules (WayTooHigh.com)
[Source: WayTooHigh.com via Union Leader, Dec 4]
Sunday, December 03, 2006
Saturday, December 02, 2006
Seventy-two pages, five-pages or one line? (WayTooHigh.com)
[REPOST, Nov 4, 2006]
Sample Transparent Credit / Debit Card Receipt
To liberally paraphrase Oliver Wendell Holmes Jr. who said, "a page of history is worth a volume of logic," posting the exact merchant interchange fee (sample below) on all charge receipts is worth a volume of confusing fee schedules cloaked within dozens and dozens of website pages.
The two leading card associations now post their fees for review; there are from five to seventy-two respective website pages to identify their rates.
Isn't the below unadulterated sample receipt more guideless and simple to understand?
30 MINUTE PHOTOS ETC.
92 CORP. PK PL
IRVINE, CA 92606
TERMINAL I.D.:................... 000000000
MERCHANT #:............. 00000000000000
VISA *
453232
SALE EXP:................................... 08/09
BATCH: 0043523....INVOICE: 22545612
DATE: NOV 2, 06.............. TIME: 11:42
RRN: 00000000........AUTH NO: 0211190
Interchange Fee:.... $8.26
TOTAL...................$485.66
GENERAL MERCHANDISE 05
30 Minute Photos Etc.
X_____________________________
I AGREE TO PAY THE ABOVE TOTAL AMOUNT
ACCORDING TO CARD ISSUER AGREEMENT
(MERCHANT AGREEMENT IF CREDIT VOUCHER)
[Source: WayTooHigh.com]
Growing List of Reasons to Lower and End Interchange Fees (WayTooHigh.com)
[REPOST from Oct 9, 2006]
Seemingly, the banks’ formula is to create an ocean of control. One retailer quipped that Visa® and MasterCard’s® motto should be: there are three certainties: death, taxes and rising interchange fees.
Even so, technology today speeds up everything including lines at airports. New advanced technology programs geared towards frequent flyers even help limit security check-point inconveniences.
At home, technology is speeding up our lives too. Those one-hour television series are now just over 30-minutes with TiVo. I tune into a program half way through, start the TiVo playback and speed through the show, allotting more time to edit WayTooHigh.com.
These efficiencies are everywhere except when it comes to merchant interchange fees.
A recent Forbes Magazine (Oct. 16, p 18) study of Silicon Valley identified that in just 50-years the storage capacity on a computer’s hard drive went from 2,000 bits to 421 billion bits on a square inch. As speed went up, prices went down, but not apparently when it comes to electronic payment transactions.
Another example of efficiency: Apple is introducing a new consumer service for downloading digital movies in minutes for a few dollars - then again, that is prior to adding Visa® and MasterCard’s® take for online ordering.
Has anyone heard Starbucks blame fraud as a justifiable reason to increase the fees on their highly accepted gift cards? They even linked up with CoinStar and technology to easily transfer consumers' change into plastic Starbucks gift cards in seconds and with no added charges or "convenience fees," - as you would expect from TicketMaster. Like all gift cards, at Starbucks, there are no added payment charges and certainly no interchange fees, even though there are technology costs associated with this program. And, the last thing anyone expects to hear is that Starbucks is facing financial woes due to the electronic transaction costs from its gift cards; rather it has been a rich financial boon to the company.
Seemingly, the banks’ formula is to create an ocean of control. One retailer quipped that Visa® and MasterCard’s® motto should be: there are three certainties: death, taxes and rising interchange fees.
Even so, technology today speeds up everything including lines at airports. New advanced technology programs geared towards frequent flyers even help limit security check-point inconveniences.
At home, technology is speeding up our lives too. Those one-hour television series are now just over 30-minutes with TiVo. I tune into a program half way through, start the TiVo playback and speed through the show, allotting more time to edit WayTooHigh.com.
These efficiencies are everywhere except when it comes to merchant interchange fees.
A recent Forbes Magazine (Oct. 16, p 18) study of Silicon Valley identified that in just 50-years the storage capacity on a computer’s hard drive went from 2,000 bits to 421 billion bits on a square inch. As speed went up, prices went down, but not apparently when it comes to electronic payment transactions.
Another example of efficiency: Apple is introducing a new consumer service for downloading digital movies in minutes for a few dollars - then again, that is prior to adding Visa® and MasterCard’s® take for online ordering.
Has anyone heard Starbucks blame fraud as a justifiable reason to increase the fees on their highly accepted gift cards? They even linked up with CoinStar and technology to easily transfer consumers' change into plastic Starbucks gift cards in seconds and with no added charges or "convenience fees," - as you would expect from TicketMaster. Like all gift cards, at Starbucks, there are no added payment charges and certainly no interchange fees, even though there are technology costs associated with this program. And, the last thing anyone expects to hear is that Starbucks is facing financial woes due to the electronic transaction costs from its gift cards; rather it has been a rich financial boon to the company.
Albert Einstein's quote: "The world is a dangerous place, not because of those who do evil, but because of those who look on and do nothing," is a wake up call beyond geo-political issues, but for all activists. The passion to stand up for justice reaches all areas.
For retailers and consumers, there are those who just accept a $30 billion dollar annual bank payday at our expense, and then there are those doing something about it. As lead plaintiff in the merchant interchange litigation, we are striving to be among those who do not just look on, but act to remedy a massive injustice.
Unceasing and interchangeable excuses provide fodder for more fee increases by the banks; they are now planning for MasterCard's® rate increases next week.
Rhetorically, we wonder why even gas prices are coming down, yet interchange fees are rising? Is it that the banks’ cartel is even more powerful than OPEC’s?
The fuel price increases from months ago were attributed to many causes; at one point it was China and their mountainous consumer spending. That was the reason provided for pressure on many commodities, from fuel, gold and copper. I wonder why the banks did not also attribute their rate increases that will arrive next week on China too, or did they?
In our photo business, technology has changed our entire industry during the transition from photographic film to digital imaging. Our high-speed Kodak photo scanning brought down our price from $5.00 per picture scan to as low as 5-cents in just a few months. Technology and the use of new products like the Toyota Prius are helping to soften gas prices even more. We guess lower gas prices had more to do with the Prius than the credit card associations’ price at the pump cap gimmick.
Last weekend, during another photo conference which I addressed in Minneapolis, retailers were steaming mad at the latest round of merchant fee increases. Business owners wanted to know why there were new fee increases and what they could do to interrupt this immeasurable orgy of rate increase madness.
Entrepreneurs and all-sized businesses want to own and control their companies. But, with unremitting interchange fee increases that are forced upon us without negotiating, we are working for the banks. When other supplier’s raise their rates we can call to level concern and even arrange to go elsewhere. However, with MasterCard® and Visa®, its other partner which is also owned by many of the same banks, they dominate with a planetary-sized 80% share of the market.
Beyond technology, a study of other nations' electronic payment fees helps empower the argument for lower or even no fees.
Write a check and the interchange fee is zero.
Use a PIN-based debit card in Canada and the interchange fee is zero.
More background, click here
[Commentary: WayTooHigh.com]
Tuesday, November 28, 2006
Your PIN-based Cards Are Not Always Welcomed (Commentary, WayTooHigh.com)
*Giant Print: "...you could WIN a $1,000 Shopping Spree!*"
Tiny print: "PIN-Based ... Transactions Ineligible"
MasterCard® and Visa® delight when you have debit cards in your wallet, but, just don’t think of actually using it as a PIN-based card.
Yesterday, a reporter for a leading U.S. daily newspaper asked us about debit cards. We explained how the game works and how some promote the use of debit PIN cards as a budgetary tool - you cannot spend what you do not have.
But, in many cases, the word "debit" is cleverly positioned within the card’s hologram or printed in a color so similar to the background that it is challenging for clerks to identify whether the card is a PIN-based debit card or traditional Signature credit card.
What is the difference between PIN and Signature cards?
While your funds are quickly withdrawn from your bank account, the retailer, nonprofit organization and other entities offering electronic payments face a host of wide-ranging fees. If a PIN- based debit card is used, there is typically a fixed cost per transaction. It could be as low as 25-cents. However, if the card is processed as a traditional Signature credit card, the banks and card associations get a piece of the action - in a big way. They reap a percent of the total sale which averages about 1.7% in the U.S., but, the fee can go much higher - there are nearly 100 separate interchange fees. To sample the variety of separate interchange fes, click here.
[Although unsure of his math, yesterday, Jim Cramer opined on RealMoney.com that MasterCard gets a "10-cent cut of every charge." However, from prior news articles, it was reported that the two leading card associations are not the benefactors from the interchange fees, but rather its member banks, which own(ed) the associations (pre-MasterCard IPO). Is this the ultimate shell game? According to CNN, MasterCard "...which doesn't deal with consumers directly, makes money from the fees it charges its bank customers for processing credit- and debit-card transactions and providing other payment-related services.]
During the holiday season, if you make a charitable contribution or win a silent auction item, you are likely to pay much more. Why? Take a look at the typical silent auctions hosted by non-profits. It takes might take place in a hotel and when the winning bids are processed, the organization might only have access to a credit card imprinter, rather than an electronic terminal. When they swipe your card under the stack of carbon-copy receipts, the interchange fee could be 5% or more.
Back to the reporter, I explained the incredulity of how Visa and MasterCard lure’s cardholders in then creates restrictive barriers.
*A full-page co-branded advertisement in today’s local paper for Bed Bath & Beyond and MasterCard explains how the game works. It offers an opportunity to "win a $1,000 shopping spree" when you use your MasterCard card at BB&B. But read the fine print rules. "PIN-based and International Transactions [are] Ineligible."
[Source: commentary, WayTooHigh.com]
Tiny print: "PIN-Based ... Transactions Ineligible"
MasterCard® and Visa® delight when you have debit cards in your wallet, but, just don’t think of actually using it as a PIN-based card.
Yesterday, a reporter for a leading U.S. daily newspaper asked us about debit cards. We explained how the game works and how some promote the use of debit PIN cards as a budgetary tool - you cannot spend what you do not have.
But, in many cases, the word "debit" is cleverly positioned within the card’s hologram or printed in a color so similar to the background that it is challenging for clerks to identify whether the card is a PIN-based debit card or traditional Signature credit card.
What is the difference between PIN and Signature cards?
While your funds are quickly withdrawn from your bank account, the retailer, nonprofit organization and other entities offering electronic payments face a host of wide-ranging fees. If a PIN- based debit card is used, there is typically a fixed cost per transaction. It could be as low as 25-cents. However, if the card is processed as a traditional Signature credit card, the banks and card associations get a piece of the action - in a big way. They reap a percent of the total sale which averages about 1.7% in the U.S., but, the fee can go much higher - there are nearly 100 separate interchange fees. To sample the variety of separate interchange fes, click here.
[Although unsure of his math, yesterday, Jim Cramer opined on RealMoney.com that MasterCard gets a "10-cent cut of every charge." However, from prior news articles, it was reported that the two leading card associations are not the benefactors from the interchange fees, but rather its member banks, which own(ed) the associations (pre-MasterCard IPO). Is this the ultimate shell game? According to CNN, MasterCard "...which doesn't deal with consumers directly, makes money from the fees it charges its bank customers for processing credit- and debit-card transactions and providing other payment-related services.]
During the holiday season, if you make a charitable contribution or win a silent auction item, you are likely to pay much more. Why? Take a look at the typical silent auctions hosted by non-profits. It takes might take place in a hotel and when the winning bids are processed, the organization might only have access to a credit card imprinter, rather than an electronic terminal. When they swipe your card under the stack of carbon-copy receipts, the interchange fee could be 5% or more.
Back to the reporter, I explained the incredulity of how Visa and MasterCard lure’s cardholders in then creates restrictive barriers.
*A full-page co-branded advertisement in today’s local paper for Bed Bath & Beyond and MasterCard explains how the game works. It offers an opportunity to "win a $1,000 shopping spree" when you use your MasterCard card at BB&B. But read the fine print rules. "PIN-based and International Transactions [are] Ineligible."
Here is another look at a similar speepstakes scheme from last summer.
PIN-based cards are not welcome. Even with the slim - very slim chance of winning the $1,000, the rules preclude you from using a PIN-based card. You can enter without purchase, but just don’t use your PIN card.[Source: commentary, WayTooHigh.com]
"[New Zealand] Retailers Join Commerce Commission" (Scoop Independent News)
Retailers Join Commerce Commission in Taking Court Action Over Credit Card Fees
Seven New Zealand retailers today launched legal action against a number of credit card institutions, seeking damages from breaches of the Commerce Act The move follows the recent decision by the Commerce Commission to bring its own court proceedings over the alleged price fixing of interchange fees by these institutions.
In a statement of claim filed in the Wellington High Court today, the retail group (comprising Foodstuffs, Progressive Enterprises, Dick Smith Electronics, Farmers, Noel Leeming, Whitcoulls and Mississippi) alleges that the fixing of interchange fees is anti-competitive and should not be allowed to continue. Theretail group is also requesting that the Court award damages to reflect the losses they have incurred as a result of the breaches of the Commerce Act and compensate for alleged over-payment of fees.
The legal actions brought by the Commission and the retail group will, if successful, enableall retailers to reduce their cost of operations and thereby benefit their customers. John Albertson, Chief Executive of the NZ Retailers Association said, “Credit card fees cost New Zealandconsumers and businesses over $350 million every year.”
The separate actions brought by the Commerce Commission and the retail group follows recent regulatory action by the Reserve Bank of Australia in relation to interchange fees and the scrutiny of such fees in a number of other jurisdictions around the world.
[Source: via Scoop Independent News, press release]
Seven New Zealand retailers today launched legal action against a number of credit card institutions, seeking damages from breaches of the Commerce Act The move follows the recent decision by the Commerce Commission to bring its own court proceedings over the alleged price fixing of interchange fees by these institutions.
In a statement of claim filed in the Wellington High Court today, the retail group (comprising Foodstuffs, Progressive Enterprises, Dick Smith Electronics, Farmers, Noel Leeming, Whitcoulls and Mississippi) alleges that the fixing of interchange fees is anti-competitive and should not be allowed to continue. Theretail group is also requesting that the Court award damages to reflect the losses they have incurred as a result of the breaches of the Commerce Act and compensate for alleged over-payment of fees.
The legal actions brought by the Commission and the retail group will, if successful, enableall retailers to reduce their cost of operations and thereby benefit their customers. John Albertson, Chief Executive of the NZ Retailers Association said, “Credit card fees cost New Zealandconsumers and businesses over $350 million every year.”
The separate actions brought by the Commerce Commission and the retail group follows recent regulatory action by the Reserve Bank of Australia in relation to interchange fees and the scrutiny of such fees in a number of other jurisdictions around the world.
[Source: via Scoop Independent News, press release]
Monday, November 27, 2006
"Rivalrous Interchange Postings Add Some Clarity" (The Green Sheet)
Excerpt: ...Mitch Goldstone, President of 30 Minute Photos Etc. and co-editor of WayTooHigh.com, said the card Associations "have all their oars in the water now, but the current is too great," referring to the swell of merchant anger over discount fees. Goldstone is a plaintiff in the class-action lawsuit brought by merchants against Visa and MasterCard.
If I, myself, as the lead plaintiff have not a clue what these rates are, ... how are merchants going to figure it out?" Goldstone said. "The disclosure I want to see is the exact [interchange] fee on every credit card receipt."
Goldstone is advocating that bankcard receipts be imprinted with exact interchange fees per transaction by Nov. 24, or "black Friday," as it is known in retail circles for being one of the busiest shopping days of the year. "It would signal an important message to retailers that [the Associations] indeed are concerned about cardholders and retailers," Goldstone said.
[Source: via The Green Sheet]
If I, myself, as the lead plaintiff have not a clue what these rates are, ... how are merchants going to figure it out?" Goldstone said. "The disclosure I want to see is the exact [interchange] fee on every credit card receipt."
Goldstone is advocating that bankcard receipts be imprinted with exact interchange fees per transaction by Nov. 24, or "black Friday," as it is known in retail circles for being one of the busiest shopping days of the year. "It would signal an important message to retailers that [the Associations] indeed are concerned about cardholders and retailers," Goldstone said.
[Source: via The Green Sheet]
Sunday, November 26, 2006
"The Day May be Coming When Cell Phones Will Replace Credit Cards, Cash and Checks" (The Mercury News)
One of the most visionary profiles about new electronic payment solutions was reported on today (Nov. 26) by Mark Schwanhausser in The Mercury News.
Several new products, from using cell phones to magnetic chips could speed up payment transactions. The result will reduce costs, fraud and speed up transactions.
However, the article also reminds us of GM and the electric cars. Before the Prius, a decade ago, an efficient, non-emission electric car used technology to reduce dependence on petroleum. History showed us what happened when giant cartels stepped in to protect their fiefdom.
What will happen this time as new technologies increase efficiencies and lower costs for electronic payments? Richard K. Crone, founder of Crone Consulting in San Carlos, commented in the article that running a debit or credit transaction through a network like Visa or MasterCard costs [merchants] 1 percent to 6 percent of the purchase price in so-called interchange fees.
Currently, there is deficient competition, as Visa® and MasterCard® controls a staggering 80% of the U.S. card market, according to ATM Marketplace. As technology cuts down costs while increasing efficiencies, it becomes clearer why the banks and card associations stand accused of illegal price fixing. How can interchange rates be as high as 6%, according to Mr. Crone, when new products are poised to change this leaking system. [Interchange was designed to cover the costs of a four-party system when antiquated credit card imprinters and carbon-copy receipts required manual payment processing].
While the new technologies and cost savings are visionary, reading between the lines of the article has the makings for a sequel to the documentary, Who Killed the Electric Car - and the depth's big business might assert to protect their cash cow.
[Source: WayTooHigh.com, via The Mercury News]
Several new products, from using cell phones to magnetic chips could speed up payment transactions. The result will reduce costs, fraud and speed up transactions.
However, the article also reminds us of GM and the electric cars. Before the Prius, a decade ago, an efficient, non-emission electric car used technology to reduce dependence on petroleum. History showed us what happened when giant cartels stepped in to protect their fiefdom.
What will happen this time as new technologies increase efficiencies and lower costs for electronic payments? Richard K. Crone, founder of Crone Consulting in San Carlos, commented in the article that running a debit or credit transaction through a network like Visa or MasterCard costs [merchants] 1 percent to 6 percent of the purchase price in so-called interchange fees.
Currently, there is deficient competition, as Visa® and MasterCard® controls a staggering 80% of the U.S. card market, according to ATM Marketplace. As technology cuts down costs while increasing efficiencies, it becomes clearer why the banks and card associations stand accused of illegal price fixing. How can interchange rates be as high as 6%, according to Mr. Crone, when new products are poised to change this leaking system. [Interchange was designed to cover the costs of a four-party system when antiquated credit card imprinters and carbon-copy receipts required manual payment processing].
While the new technologies and cost savings are visionary, reading between the lines of the article has the makings for a sequel to the documentary, Who Killed the Electric Car - and the depth's big business might assert to protect their cash cow.
[Source: WayTooHigh.com, via The Mercury News]
Saturday, November 25, 2006
"[Boston] Halts Use of Credit Cards at New Meters" (via The Boston Globe)
The member banks, in the same crib as Visa® and MasterCard®, have such oppressive regulations which may have forced the city of Boston to cease use of its high-tech credit and debit card-accepting parking meters. The new meters will no longer process electronic payments as they evaluate the interchange fee charges.
The Boston Globe reported earlier this week that the City was unfamiliar with the minimum card fee requirements. The member banks involved with this scheme should have wondered how the municipality was going to afford the interchange fees on a 5-cent charge so a parent can run in to the convenience store for a gallon of milk.
The Globe staff reporter, Bruce Mohl had interviewed us for background on his follow-up Nov. 22nd article. Mr. Mohl, like apprently the City was unaware of the onerous interchange fees and the myriad of regulations forced on merchants - and municipalities. This is not unusual however, as we regularly encounter cardholders and retailers who are equally confused too. According to The Boston Globe, the city's commissioner of transportation remarked that "with every transaction, there's a transaction fee." Not so. What is the interchange fee for writing a check - even though there are clearing and other costs? Zero. What is the interchange fee for using a PIN debit card in Canada? Zero. What is the interchange fee in several economically less developed nations than the U.S.? Not zero, but in many cases less than half the 1.7% average fee charged to process credit cards in the States.
Boston Globe Quote: "Mitch Goldstone , a small-businessman from Irvine, Calif., who is the lead plaintiff in a lawsuit challenging the fees charged by credit card companies, said Boston could end up losing money if it lets people charge for whatever amount of time they want. "If a motorist can park and run into a shop for five minutes and pay, say, a quarter on their credit card, the city is in trouble," he said. "They will be potentially paying more to Visa and MasterCard than they take in."
We wonder whether the City will send a bill to Visa and MasterCard and its member bank for potentially not being upfront and clearly commenting on the fees before the $10,000 fee for each parking meter investment occurred? Fine print on a contract is one thing, but installing parking meters without asking the city how they expect to make money after subtracting the interchange fees is another.
Next week's Micro and Small Payments Conference in New York City boasts an opportunity to raise these questions of the banks and payment processing companies. In many cases, the two are the same - ever since JPMorgan Chase acquired Paymentech to force a larger piece of the pie.
[Source: WayTooHigh.com, via The Boston Globe]
The Boston Globe reported earlier this week that the City was unfamiliar with the minimum card fee requirements. The member banks involved with this scheme should have wondered how the municipality was going to afford the interchange fees on a 5-cent charge so a parent can run in to the convenience store for a gallon of milk.
The Globe staff reporter, Bruce Mohl had interviewed us for background on his follow-up Nov. 22nd article. Mr. Mohl, like apprently the City was unaware of the onerous interchange fees and the myriad of regulations forced on merchants - and municipalities. This is not unusual however, as we regularly encounter cardholders and retailers who are equally confused too. According to The Boston Globe, the city's commissioner of transportation remarked that "with every transaction, there's a transaction fee." Not so. What is the interchange fee for writing a check - even though there are clearing and other costs? Zero. What is the interchange fee for using a PIN debit card in Canada? Zero. What is the interchange fee in several economically less developed nations than the U.S.? Not zero, but in many cases less than half the 1.7% average fee charged to process credit cards in the States.
Boston Globe Quote: "Mitch Goldstone , a small-businessman from Irvine, Calif., who is the lead plaintiff in a lawsuit challenging the fees charged by credit card companies, said Boston could end up losing money if it lets people charge for whatever amount of time they want. "If a motorist can park and run into a shop for five minutes and pay, say, a quarter on their credit card, the city is in trouble," he said. "They will be potentially paying more to Visa and MasterCard than they take in."
We wonder whether the City will send a bill to Visa and MasterCard and its member bank for potentially not being upfront and clearly commenting on the fees before the $10,000 fee for each parking meter investment occurred? Fine print on a contract is one thing, but installing parking meters without asking the city how they expect to make money after subtracting the interchange fees is another.
Next week's Micro and Small Payments Conference in New York City boasts an opportunity to raise these questions of the banks and payment processing companies. In many cases, the two are the same - ever since JPMorgan Chase acquired Paymentech to force a larger piece of the pie.
[Source: WayTooHigh.com, via The Boston Globe]
Friday, November 24, 2006
Thursday, November 23, 2006
"MasterCard Rebuked at EU Closed Hearing..." (via Reuters)
The second largest credit card association was rebuked at the closed-door European Commission antitrust hearing. According to Reuters, MasterCard® argued that the complaint is "obsolete" due to its restructuring. But, anyone knows that even though you try to cover up your tracks, an alleged crime that occurred prior to going public is still a violation.
The Reuters coverage also mentioned that MasterCard "claim[ed] incorrectly that Britain had dropped an investigation into its fees."
[Source: WayTooHigh.com, via Reuters]
The Reuters coverage also mentioned that MasterCard "claim[ed] incorrectly that Britain had dropped an investigation into its fees."
[Source: WayTooHigh.com, via Reuters]
Tuesday, November 21, 2006
Boston Strangled by Interchange Rules (WayTooHigh.com)
While the leading payment systems promote micropayments for small credit and debit card charges, the city of Boston just got caught violating their rules.
According to The Boston Globe (Nov. 21), reporter Bruce Mohl wrote that Visa® and MasterCard® do not permit minimum purchase limits. [Businesses which require a minimum purchase to accept a Visa or MasterCard are in violation of the merchant agreement rules]. Like many companies, our retail and national online boutique photo service are equally forced to accept Visa and MasterCard as payment, even for the smallest of items. This translates into a loss when there are minimum charge fees which in some cases can be higher than the cost of the sale.
Why is this important? Boston, for example, recently installed new parking meters that accept credit cards [see photo], but require a two-dollar minimum charge for the convenience of entering a cashless transaction.
On the other hand, recent news items about vending machines accepting credit cards raised new concerns about interchange fees. Interchange fees will let you quench your thirst and charge a soda while you sweat it driving around Boston looking for a parking space.
As the battle against Visa and MasterCard continues to affect merchants across the nation, it is also affecting municipalities too. A micro and small payment conference is planned for New York City later this month and it will be interesting to hear how they address this and the entire interchange fee issue. Loyalty, speed, improved convenience are what will be discussed to increase sales, but for whom? For more info on the conference, click here.
Something does not make a whole lot of sense here. Wouldn't the two leading credit card associations wondered how the city of Boston was going to afford the interchange fee for their new credit card-accepting meters? If the minimum charge for a parking meter is, say a nickel for 6-minutes, why didn't Visa and MasterCard mention that in most cases the minimum interchange fee could be greater than the whole charge? Much greater! Would the city of Boston still have invested in this technology?
Background: 5-Cent Interchange Fees? (WayTooHigh.com)
[Source: WayTooHigh.com, via The Boston Globe]
According to The Boston Globe (Nov. 21), reporter Bruce Mohl wrote that Visa® and MasterCard® do not permit minimum purchase limits. [Businesses which require a minimum purchase to accept a Visa or MasterCard are in violation of the merchant agreement rules]. Like many companies, our retail and national online boutique photo service are equally forced to accept Visa and MasterCard as payment, even for the smallest of items. This translates into a loss when there are minimum charge fees which in some cases can be higher than the cost of the sale.
Why is this important? Boston, for example, recently installed new parking meters that accept credit cards [see photo], but require a two-dollar minimum charge for the convenience of entering a cashless transaction.
On the other hand, recent news items about vending machines accepting credit cards raised new concerns about interchange fees. Interchange fees will let you quench your thirst and charge a soda while you sweat it driving around Boston looking for a parking space.
As the battle against Visa and MasterCard continues to affect merchants across the nation, it is also affecting municipalities too. A micro and small payment conference is planned for New York City later this month and it will be interesting to hear how they address this and the entire interchange fee issue. Loyalty, speed, improved convenience are what will be discussed to increase sales, but for whom? For more info on the conference, click here.
Something does not make a whole lot of sense here. Wouldn't the two leading credit card associations wondered how the city of Boston was going to afford the interchange fee for their new credit card-accepting meters? If the minimum charge for a parking meter is, say a nickel for 6-minutes, why didn't Visa and MasterCard mention that in most cases the minimum interchange fee could be greater than the whole charge? Much greater! Would the city of Boston still have invested in this technology?
Background: 5-Cent Interchange Fees? (WayTooHigh.com)
[Source: WayTooHigh.com, via The Boston Globe]
Monday, November 20, 2006
"Consumers Union Warns Shoppers..." (via U.S. Newswire)
Consumers Union Warns Shoppers About Penalty Fees, Interest Rate Hikes, and Misleading Contracts
SAN FRANCISCO, Nov. 20 /U.S. Newswire/ -- Just as the holiday season gets ready to kick into high gear, Consumers Union is warning shoppers about the increasing number of credit card traps that can trip up consumers and lead to spiraling debt. To help get out the message and mobilize support for reform, the group is releasing "It's Always Christmas Time (For VISA)," an animated satire that takes aim at abusive credit card fees and practices.
"You can find yourself buried in debt if you aren't careful to avoid the credit card gotchas," said Michelle Jun, Staff Attorney for Consumers Union. "Too many credit cards are designed to get you in debt and keep you there."
"It's Always Christmas Time (For VISA)" is a lighthearted take on the unexpected fees, interest rate hikes, and misleading contracts that are contributing to high credit card debt in the U.S. After viewing the animation, viewers can send an email to Congress asking lawmakers to support credit card reforms. To view the animation, click on [this link].
Consumers enjoy few protections when it comes to credit cards and there are an increasing number of ways they can be penalized with fees or get stuck with higher interest rates:
-- Universal default: Your interest rate can skyrocket if your credit score declines because of your behavior with other creditors even if you always pay your credit card on time and never miss a payment. Some card issuers will raise your rate if you inquire about a car loan or open a new credit card.
-- Change of terms: Credit card terms keep changing. Read the fine print and chances are you'll find this disclosure: "We reserve the right to change the terms (including the APRs) at any time for any reason." A fixed rate is fixed until the bank gives you at least 15 days notice that it isn't. If you want to keep your account open, you'll pay the higher new rate on your existing balance.
-- Teaser rates: That low rate you signed up for expires suddenly and you end up paying more. A temptingly low introductory rate can climb to 30 percent or more.
-- Minimim payment: If you pay the minimum payment every month, you'll end up paying a lot more than what you charged and you could be on the hook for a very long time.
-- On time payment: Card issuers are systematically mailing statements closer to the due date, giving customers less turnaround time. You can be hit with a late fee even if the payment is mailed on time. The average fee for a late payment has more than doubled in the past decade.
-- Double cycle billing: Finance charges are usually calculated using the average daily balance. If you alternate between paying off and carrying a balance, you'll end up paying more interest.
-- Cash advance/convenience checks: The interest rates on these are higher than your credit card.
-- Penalty interest and fees: Late payments can raise your interest from 7 percent to 27 percent ! Rather than rejecting charges that exceed your credit card limit, issuers today often let them go through but then charge a hefty fee -- as high as $39.
-- Fees, fees, and more fees: As if the penalties weren't enough, you pay more fees for paying by phone or charging abroad. You may have to pay a fee to receive what used to be free year- end summary statements.
-- Balance transfer switcheroo: Transferring a balance from an account with a high APR to another one with a lower interest rate could come at a high cost. Any payments you make are typically applied first to the lowest rate balance. So while the credit card company uses your payment to quickly pay off that 0 percent transfer balance, you are piling up interest on purchases, at say, 18 percent. Multiple balance transfers will hurt your credit score.
A recent report by the General Accounting Office (GAO) found that there are many types of credit card fees, and that they have risen much faster than inflation. It also finds that current fee disclosures are difficult to understand, bury important information, and often fail to convey to cardholders when late fees would be charged and what actions could result in penalty interest rates. The report found that 35 percent of active credit cardholders of the six largest issuers were charged at least one penalty fee in 2005, averaging $33.64.
Consumers Union is urging Congress to pass reforms to rein in abusive credit card practices, including banning universal default, stopping card issuers from applying punitive interest rates to the entire balance, and requiring better disclosure so consumers understand the true cost of making only the minimum payment. For a more complete list of credit card reforms supported by Consumers Union and other consumer groups, see [this link].
"Getting trapped in the jaws of credit card debt has become alarmingly easy," said Jun. "Congress should not let another year go by without acting to prohibit abusive credit card fees and practices."
---
Consumers Union, publisher of Consumer Reports, is an independent, nonprofit testing and information organization serving only the consumer. We are a comprehensive source of unbiased advice about products and services, personal finance, health nutrition, and other consumer concerns. Since 1936, our mission has been to test products, inform the public, and protect consumers.
[source: Consumers Union, via U.S. Newswire]
SAN FRANCISCO, Nov. 20 /U.S. Newswire/ -- Just as the holiday season gets ready to kick into high gear, Consumers Union is warning shoppers about the increasing number of credit card traps that can trip up consumers and lead to spiraling debt. To help get out the message and mobilize support for reform, the group is releasing "It's Always Christmas Time (For VISA)," an animated satire that takes aim at abusive credit card fees and practices.
"You can find yourself buried in debt if you aren't careful to avoid the credit card gotchas," said Michelle Jun, Staff Attorney for Consumers Union. "Too many credit cards are designed to get you in debt and keep you there."
"It's Always Christmas Time (For VISA)" is a lighthearted take on the unexpected fees, interest rate hikes, and misleading contracts that are contributing to high credit card debt in the U.S. After viewing the animation, viewers can send an email to Congress asking lawmakers to support credit card reforms. To view the animation, click on [this link].
Consumers enjoy few protections when it comes to credit cards and there are an increasing number of ways they can be penalized with fees or get stuck with higher interest rates:
-- Universal default: Your interest rate can skyrocket if your credit score declines because of your behavior with other creditors even if you always pay your credit card on time and never miss a payment. Some card issuers will raise your rate if you inquire about a car loan or open a new credit card.
-- Change of terms: Credit card terms keep changing. Read the fine print and chances are you'll find this disclosure: "We reserve the right to change the terms (including the APRs) at any time for any reason." A fixed rate is fixed until the bank gives you at least 15 days notice that it isn't. If you want to keep your account open, you'll pay the higher new rate on your existing balance.
-- Teaser rates: That low rate you signed up for expires suddenly and you end up paying more. A temptingly low introductory rate can climb to 30 percent or more.
-- Minimim payment: If you pay the minimum payment every month, you'll end up paying a lot more than what you charged and you could be on the hook for a very long time.
-- On time payment: Card issuers are systematically mailing statements closer to the due date, giving customers less turnaround time. You can be hit with a late fee even if the payment is mailed on time. The average fee for a late payment has more than doubled in the past decade.
-- Double cycle billing: Finance charges are usually calculated using the average daily balance. If you alternate between paying off and carrying a balance, you'll end up paying more interest.
-- Cash advance/convenience checks: The interest rates on these are higher than your credit card.
-- Penalty interest and fees: Late payments can raise your interest from 7 percent to 27 percent ! Rather than rejecting charges that exceed your credit card limit, issuers today often let them go through but then charge a hefty fee -- as high as $39.
-- Fees, fees, and more fees: As if the penalties weren't enough, you pay more fees for paying by phone or charging abroad. You may have to pay a fee to receive what used to be free year- end summary statements.
-- Balance transfer switcheroo: Transferring a balance from an account with a high APR to another one with a lower interest rate could come at a high cost. Any payments you make are typically applied first to the lowest rate balance. So while the credit card company uses your payment to quickly pay off that 0 percent transfer balance, you are piling up interest on purchases, at say, 18 percent. Multiple balance transfers will hurt your credit score.
A recent report by the General Accounting Office (GAO) found that there are many types of credit card fees, and that they have risen much faster than inflation. It also finds that current fee disclosures are difficult to understand, bury important information, and often fail to convey to cardholders when late fees would be charged and what actions could result in penalty interest rates. The report found that 35 percent of active credit cardholders of the six largest issuers were charged at least one penalty fee in 2005, averaging $33.64.
Consumers Union is urging Congress to pass reforms to rein in abusive credit card practices, including banning universal default, stopping card issuers from applying punitive interest rates to the entire balance, and requiring better disclosure so consumers understand the true cost of making only the minimum payment. For a more complete list of credit card reforms supported by Consumers Union and other consumer groups, see [this link].
"Getting trapped in the jaws of credit card debt has become alarmingly easy," said Jun. "Congress should not let another year go by without acting to prohibit abusive credit card fees and practices."
---
Consumers Union, publisher of Consumer Reports, is an independent, nonprofit testing and information organization serving only the consumer. We are a comprehensive source of unbiased advice about products and services, personal finance, health nutrition, and other consumer concerns. Since 1936, our mission has been to test products, inform the public, and protect consumers.
[source: Consumers Union, via U.S. Newswire]
Links to Popular Recent Postings (WayTooHigh.com)
Sample Transparent Credit / Debit Card Receipt
Printing Exact Merchant Interchange Fee on Charge Receipts by Thanksgiving (WayTooHigh.com)
Mitch Goldstone to Address Intl Consumer Electronics Show (WayTooHigh.com)
Understanding Merchant "Interchange" Fees Is Onerous Challenge (WayTooHigh.com)
No Interchange Fee on Gift Cards (WayTooHigh.com)
Commentary on Technology, Fighting Mad Merchants and Real Blogs (WayTooHigh.com)
Merchants Say Visa and MasterCard Violate Federal Antitrust Laws (MPC Press Release)
Is Visa® Taking Clarity and Replacing it with Hubris? (WayTooHigh.com)
Interchange Debit Card Fees Are Anything But 'Price-less' (WayTooHigh.com)
MasterCard® Interchange Rate Schedules on Website (via PRNewswire)
MasterCard Worldwide® Sweepstakes Scheme Impacts Merchants (WayTooHigh.com)
FedEx® vs. Visa® and MasterCard® (WayTooHigh.com)
Growing List of Reasons to Lower and End Interchange Fees (WayTooHigh.com)
Revisiting the Merchant Interchange Complaint (WayTooHigh.com)
Citigroup® , Bank of America® and HSBC® scheme with American Express (WayTooHigh.com)
We Told You So (WayTooHigh.com)
Bring on the violins. The sky is falling, the sky is falling.
From our prospective, the banking industry might be responding to antitrust concerns by possibly having a research firm fight its battle. Credibility could be trumped by those "product providers" who fund the reports. Some research firms are known for their pay-to-perform status. Pay a fee and the results you want appear in a "White Paper". While not making any specific assertions in this case, the report could be inked with finger prints of those seeking to protect their multi-billion dollar merchant interchange fee scheme. A simple visit to their website identifies that they are commissioned by banks.
According to the research report, cardholders might be penalized if the Office of Fair Trade imposes new regulations on Visa® and Mastercard®; both credit card associations and member banks are accused of allegedly price-fixing their credit card fees.
Decades ago, when these merchant interchange fees were cost based there were about ten separate charges. Today, there are nearly one hundred and most retailers use the highly efficient and cost saving electronic processing terminals, rather than the antiquated bulky credit card imprints and swiping cards under a stack of carbon copy receipts.
We expect to read more and more "research" threats like this one, but we are ready to share each with you.
[Source: WayTooHigh.com via Personal Finance & Savings]
From our prospective, the banking industry might be responding to antitrust concerns by possibly having a research firm fight its battle. Credibility could be trumped by those "product providers" who fund the reports. Some research firms are known for their pay-to-perform status. Pay a fee and the results you want appear in a "White Paper". While not making any specific assertions in this case, the report could be inked with finger prints of those seeking to protect their multi-billion dollar merchant interchange fee scheme. A simple visit to their website identifies that they are commissioned by banks.
According to the research report, cardholders might be penalized if the Office of Fair Trade imposes new regulations on Visa® and Mastercard®; both credit card associations and member banks are accused of allegedly price-fixing their credit card fees.
Decades ago, when these merchant interchange fees were cost based there were about ten separate charges. Today, there are nearly one hundred and most retailers use the highly efficient and cost saving electronic processing terminals, rather than the antiquated bulky credit card imprints and swiping cards under a stack of carbon copy receipts.
We expect to read more and more "research" threats like this one, but we are ready to share each with you.
[Source: WayTooHigh.com via Personal Finance & Savings]
Saturday, November 18, 2006
FMI Featured on Modern Marvel - History Channel (WayTooHigh.com)
During a recent airing of Modern Marvels, supermarkets were profiled and provided a history of how technological and marketing advancements helped impact and enhance all our lives. Tim Hammonds, President and CEO of the Food Marketing Institute was prominently featured in the segment and he described many of the changes.
What was notably not discussed is what happens when consumers wheel their carts to the check out line. Consumers are forced to pay supracompetitive, uncontrollable and hidden interchange fees. Even as Visa® and MasterCard® are posting the myriad of rates on its websites, we challenge merchants to identify what their customers' are paying. Rocket science seems easier to understand. What is easier to understand is how cartels operate.
According to a recent FMI report, the Washington D.C.-based trade group explained that credit and debit card fees account for the 2nd greatest impact after energy costs on their members' businesses.
[Source: WayTooHigh.com via Modern Marvel]
What was notably not discussed is what happens when consumers wheel their carts to the check out line. Consumers are forced to pay supracompetitive, uncontrollable and hidden interchange fees. Even as Visa® and MasterCard® are posting the myriad of rates on its websites, we challenge merchants to identify what their customers' are paying. Rocket science seems easier to understand. What is easier to understand is how cartels operate.
According to a recent FMI report, the Washington D.C.-based trade group explained that credit and debit card fees account for the 2nd greatest impact after energy costs on their members' businesses.
[Source: WayTooHigh.com via Modern Marvel]
Thursday, November 16, 2006
Why Not Post Exact Interchange Fee on Receipts? (WayTooHigh.com)
Banks are using technology to spur new customer loyalty. Why not go even further and use technology to help all their retail and cardholder customers?
According to an article in today’s Wall Street Journal reported by Jane J. Kim, Well Fargo® is now offering numerous online tools to help customers track their investments. “My Savings Plan” calculates and tracks accounts to better help customers schedule and manage their online accounts. Technology has played an important part in providing more lavish and detailed data. If Well Fargo and other banks can use technology to provide more information, why are they inflexible and silent about compelling the two leading credit card associations to publish the exact interchange fee for every charge on all cardholder receipts?
Wells Fargo and the other named defendants are members of both Visa® and MasterCard® and also issuers and acquirers.
[Source: WayTooHigh.com]
According to an article in today’s Wall Street Journal reported by Jane J. Kim, Well Fargo® is now offering numerous online tools to help customers track their investments. “My Savings Plan” calculates and tracks accounts to better help customers schedule and manage their online accounts. Technology has played an important part in providing more lavish and detailed data. If Well Fargo and other banks can use technology to provide more information, why are they inflexible and silent about compelling the two leading credit card associations to publish the exact interchange fee for every charge on all cardholder receipts?
Wells Fargo and the other named defendants are members of both Visa® and MasterCard® and also issuers and acquirers.
[Source: WayTooHigh.com]
Wednesday, November 15, 2006
No Interchange Fee on Gift Cards (WayTooHigh.com)
With the holiday season speedily encroaching, more retailers are expected to promote their own electronic payment gift cards.
Like the two leading credit card associations, these cards share many of the same transaction and production costs, yet they are without interchange fees. Just like when writing a check, or using a debit PIN card in Canada, gift cards also abolished traditional interchange fees.
Visa® and MasterCard® might argue that their member banks are part of a four-party system, with issuers, acquirers, cardholders and retailers all involved with each transaction. A retailer offering gift cards limits the activities and also much of the expense. However, when Citigroup for example is both the acquirer and issuer, they are getting paid more. Even realtors who are on both ends of a residential property sale adjust their fees downward.
While gift cards are without interchange fees, the banks are reaping extraordinary windfall profits from an antiquated payment system and because most consumers and merchants are entirely unaware that this is a $30 billion dollar annual scheme which Visa and MasterCard designed, control and are fighting to protect.
Commentary: WayTooHigh.com]
Monday, November 13, 2006
Interchange: $30 Billion Global Issue (WayTooHigh.com)
With more than 550 news and commentary updates since we launched WayTooHigh.com - The Credit Card Interchange Report, we have noticed that our site is blanketing the globe. The recent news from New Zealand and Europe is a perfect example; it is yielding more readers and international interest from abroad.
Our prospective appears to be resonating.
As a retailer, ecommerce business and the very first lead plaintiff in the very first merchant antitrust interchange class-action litigation (June, 2005) we have become the personality behind this global battle against Visa®, MasterCard® and their member banks. But, it is not just us. There are millions of merchants - everyone who accepts Visa and MasterCard who share our outrage over the anticompetitive price-fixing by agreement and unbridled restraints on competition.
Don’t just think Cartier and Bloomingdales. Charitable groups, the mom & pop corner convenience shops in inner cities and even online donations to groups like the American Red Cross are all impacted and pay fees. Sometimes, the most needy groups raising money for important causes are forced to pay the highest rates because they only use the antiquated paper, carbon-copy receipts, rather than electronic terminals for processing Visa and MasterCards. Those rates can be as high as four percent of each dollar donated. Four percent and more!
Advocavy groups for Visa and MasterCard argue that organizations are not forced to accept Visa and MasterCard. Wrong. We would be out of business if those two powerful associations are not honored.
The market power and price discrimination practiced by Visa and MasterCard are now entering a more public arena. Over the years, as technology has lowered most components of processing electronic payments, the card associations went in a divergent direction; they raised fees. Their 80 percent monopolistic share of the market overshadows every other antitrust action. The two clearinghouses operate a network that are taxing consumers and merchants by $30 billion each year.
During the recent run up in fuel costs, they reaped windfall profits without incurring an equal share of expenses. Their solution was to put a fifty dollar limit on interchange fees at service stations. They got half the solution right by imposing a cap on fees, but rather than a fifty dollar limit, it should be at the same level as clearing checks and even debit PIN cards in Canada - zero.
Originally, the fees were designed to cover the costly paper receipt payment transactions. When that went the way of 8-track tapes and vinyl records, their fees went higher. Much higher. In some cases upwards of three-hundred percent higher for debit card fees since the late 1990s.
The named defendants' conspiracy to maintain market power also showers them with substantial economic benefits at the expense of their two core customer segments, cardholders and merchants.
As co-editors of WayTooHigh.com, we hear horror stories every day from our customers who are just as irritated as us. However, we are also eager to learn of even more personal stories about how interchange fees are impacting other retailers.
In January, we will be attending and addressing the International Consumer Electronics Show. The nation's largest trade show is home to retailers who, like us, are forced to accept nearly one-hundred separate interchange fees.
From New Zealand to Europe to Southern California, this battle is gaining attention. It is raising questions about how Visa, MasterCard and its member banks are able to get way with this extraordinary blanket of hidden surcharges that impacts everyone while enriching the banks.
Adding independent board members, flicking off future legal liabilities on public shareholders and posting a myriad of confusing rates on its websites is not the complete solution. Recently Visa and MasterCard proclaimed that they want their rtes to be more transparent. We provided the smartest temporary fix: start publishing the exact interchange fee for every debit and card transaction right on each cardholder's receipt and begin this by "Black Friday, one of the busiest shopping days - the day after Thanksgiving.
[Commentary: WayTooHigh.com]
Our prospective appears to be resonating.
As a retailer, ecommerce business and the very first lead plaintiff in the very first merchant antitrust interchange class-action litigation (June, 2005) we have become the personality behind this global battle against Visa®, MasterCard® and their member banks. But, it is not just us. There are millions of merchants - everyone who accepts Visa and MasterCard who share our outrage over the anticompetitive price-fixing by agreement and unbridled restraints on competition.
Don’t just think Cartier and Bloomingdales. Charitable groups, the mom & pop corner convenience shops in inner cities and even online donations to groups like the American Red Cross are all impacted and pay fees. Sometimes, the most needy groups raising money for important causes are forced to pay the highest rates because they only use the antiquated paper, carbon-copy receipts, rather than electronic terminals for processing Visa and MasterCards. Those rates can be as high as four percent of each dollar donated. Four percent and more!
Advocavy groups for Visa and MasterCard argue that organizations are not forced to accept Visa and MasterCard. Wrong. We would be out of business if those two powerful associations are not honored.
The market power and price discrimination practiced by Visa and MasterCard are now entering a more public arena. Over the years, as technology has lowered most components of processing electronic payments, the card associations went in a divergent direction; they raised fees. Their 80 percent monopolistic share of the market overshadows every other antitrust action. The two clearinghouses operate a network that are taxing consumers and merchants by $30 billion each year.
During the recent run up in fuel costs, they reaped windfall profits without incurring an equal share of expenses. Their solution was to put a fifty dollar limit on interchange fees at service stations. They got half the solution right by imposing a cap on fees, but rather than a fifty dollar limit, it should be at the same level as clearing checks and even debit PIN cards in Canada - zero.
Originally, the fees were designed to cover the costly paper receipt payment transactions. When that went the way of 8-track tapes and vinyl records, their fees went higher. Much higher. In some cases upwards of three-hundred percent higher for debit card fees since the late 1990s.
The named defendants' conspiracy to maintain market power also showers them with substantial economic benefits at the expense of their two core customer segments, cardholders and merchants.
As co-editors of WayTooHigh.com, we hear horror stories every day from our customers who are just as irritated as us. However, we are also eager to learn of even more personal stories about how interchange fees are impacting other retailers.
In January, we will be attending and addressing the International Consumer Electronics Show. The nation's largest trade show is home to retailers who, like us, are forced to accept nearly one-hundred separate interchange fees.
From New Zealand to Europe to Southern California, this battle is gaining attention. It is raising questions about how Visa, MasterCard and its member banks are able to get way with this extraordinary blanket of hidden surcharges that impacts everyone while enriching the banks.
Adding independent board members, flicking off future legal liabilities on public shareholders and posting a myriad of confusing rates on its websites is not the complete solution. Recently Visa and MasterCard proclaimed that they want their rtes to be more transparent. We provided the smartest temporary fix: start publishing the exact interchange fee for every debit and card transaction right on each cardholder's receipt and begin this by "Black Friday, one of the busiest shopping days - the day after Thanksgiving.
[Commentary: WayTooHigh.com]
"EU to start MasterCard closed hearing on Tuesday" (Reuters)
Accoring to Reuters, "MasterCard faces EU antitrust scrutiny this week over fees it charges shops to accept its credit and debit cards as part of a 1.3 trillion euro ($1.67 trillion) annual turnover. The European Commission alleges the company restricted competition by setting minimum prices retailers must pay, and will open two days of closed hearings starting on Tuesday. The Commission is considering abolishing controversial and complex interbank fees charged by MasterCard, which can differ card by card."
[Source: Via Reuters]
[Source: Via Reuters]
Seems a New PR War Has Begun (WayTooHigh.com)
This morning, we noticed a news item from AFX Financial News warning that consumers might be facing new card fees. Based on the E.U.s regulatory interventions, the credit card associations might need to recoup lost revenue by increasing consumers' card fees. This sounds more like a drug addict who needs to identify where they will be getting their next fix from.
Rather than scoring a new pool of income, the card issuers should look back to when interchange fees were cost-based. Like most businesses, efficiencies and new technologies should also be bringing down merchant interchange fees, but the inverse is occurring due to what we alledge is an anticompetitive, price-fixing monolopy.
Potentially threatening card holders and casting fears of new fees to replace their ocean of windfall profits is not fair. Should we expect to read more ominous predictions and amplified fear of new fees to counter the impending Office of Fair Trade's response to anticompetitive practices by the credit card associations?
[Source: WayTooHigh.com via AFX news item]
Rather than scoring a new pool of income, the card issuers should look back to when interchange fees were cost-based. Like most businesses, efficiencies and new technologies should also be bringing down merchant interchange fees, but the inverse is occurring due to what we alledge is an anticompetitive, price-fixing monolopy.
Potentially threatening card holders and casting fears of new fees to replace their ocean of windfall profits is not fair. Should we expect to read more ominous predictions and amplified fear of new fees to counter the impending Office of Fair Trade's response to anticompetitive practices by the credit card associations?
[Source: WayTooHigh.com via AFX news item]
"Visa/MasterCard Need to Change Their Business Practices" (MPC)
WASHINGTON, Nov. 13 /PRNewswire/ -- The Merchants Payments Coalition today said an independent new report confirms that "merchants get nothing" out of programs that constitute nearly half of the $30.7 billion in credit and debit card interchange fees Visa and MasterCard collect annually in the United States.
"A New Business Model for Card Payments," issued by Chicago's Diamond Management and Technology Consultants Inc. (http://www.diamondconsultants.com), notes that "processing - the original reason for interchange - comprises only 13 percent of interchange costs." Meanwhile, the largest component of interchange, paying for issuer rewards programs, accounts for 44 percent of interchange costs, "but merchants get nothing out of these programs," the report adds.
And the trend is expected to get worse unless there is a fundamental change in how the U.S. credit card system operates.
"The card associations and their bank issuers are pursuing revenue growth through higher interchange rates," according to the report, which notes that since 1999, interchange fees have continually risen. "Given the merchants' lack of perceived value for what they pay, the situation is clearly unstable," the report adds.
"This report corroborates the message that merchants have communicated to lawmakers over the past year -- that interchange fees are far, far higher than the actual benefits delivered to both merchants and the vast majority of consumers," said MPC Chairman Mallory Duncan, senior vice president and general counsel at the National Retail Federation. "This is important research that will help the public understand how much Visa and MasterCard are needlessly charging them. Among other things, this fee is fueling the flood of credit card offers stuffing consumers' mailboxes."
"Visa and MasterCard rules effectively require that interchange be built into prices and make cash discounts all but impossible, so these fees take money out of consumers' pockets regardless of how they pay," Duncan said. "Consumers are led to believe that rewards are free, but this study shows consumers are being charged for these rewards whether they ever get to use them or not."
Given Visa and MasterCard's refusal to fully disclose operating rules that govern interchange, the study offers a rare glimpse into what costs are paid for by the largely unknown fees. In addition, the researchers said merchant dissatisfaction with unreasonable interchange fees raises important questions about the future of the credit card business model and may lead to the unraveling of the traditional system in coming years.
MPC has argued that collective setting of interchange fees by Visa and MasterCard violates federal antitrust laws and costs merchants and consumers an estimated $30.7 billion last year. MPC is fighting for greater transparency, the disclosure of operating rules that govern interchange rates, and reasonable fees based on actual transaction costs.
Interchange is a percentage of each transaction that Visa and MasterCard banks collect from merchants every time their credit or debit cards are used to pay for a purchase. The fee varies with type of merchant, transaction and card, but averages close to 2 percent for most credit card and signature debit transactions.
The Merchants Payments Coalition is a group of about 20 trade associations representing retailers, restaurants, supermarkets, drug stores, convenience stores, gas stations, on-line merchants and other businesses that accept debit and credit cards. MPC is fighting for a more competitive and transparent card system that works better for consumers and merchants alike. The coalition's member associations collectively represent about 2.7 million locations with approximately 50 million employees.
[Source: Merchants Payments Coalition]
"A New Business Model for Card Payments," issued by Chicago's Diamond Management and Technology Consultants Inc. (http://www.diamondconsultants.com), notes that "processing - the original reason for interchange - comprises only 13 percent of interchange costs." Meanwhile, the largest component of interchange, paying for issuer rewards programs, accounts for 44 percent of interchange costs, "but merchants get nothing out of these programs," the report adds.
And the trend is expected to get worse unless there is a fundamental change in how the U.S. credit card system operates.
"The card associations and their bank issuers are pursuing revenue growth through higher interchange rates," according to the report, which notes that since 1999, interchange fees have continually risen. "Given the merchants' lack of perceived value for what they pay, the situation is clearly unstable," the report adds.
"This report corroborates the message that merchants have communicated to lawmakers over the past year -- that interchange fees are far, far higher than the actual benefits delivered to both merchants and the vast majority of consumers," said MPC Chairman Mallory Duncan, senior vice president and general counsel at the National Retail Federation. "This is important research that will help the public understand how much Visa and MasterCard are needlessly charging them. Among other things, this fee is fueling the flood of credit card offers stuffing consumers' mailboxes."
"Visa and MasterCard rules effectively require that interchange be built into prices and make cash discounts all but impossible, so these fees take money out of consumers' pockets regardless of how they pay," Duncan said. "Consumers are led to believe that rewards are free, but this study shows consumers are being charged for these rewards whether they ever get to use them or not."
Given Visa and MasterCard's refusal to fully disclose operating rules that govern interchange, the study offers a rare glimpse into what costs are paid for by the largely unknown fees. In addition, the researchers said merchant dissatisfaction with unreasonable interchange fees raises important questions about the future of the credit card business model and may lead to the unraveling of the traditional system in coming years.
MPC has argued that collective setting of interchange fees by Visa and MasterCard violates federal antitrust laws and costs merchants and consumers an estimated $30.7 billion last year. MPC is fighting for greater transparency, the disclosure of operating rules that govern interchange rates, and reasonable fees based on actual transaction costs.
Interchange is a percentage of each transaction that Visa and MasterCard banks collect from merchants every time their credit or debit cards are used to pay for a purchase. The fee varies with type of merchant, transaction and card, but averages close to 2 percent for most credit card and signature debit transactions.
The Merchants Payments Coalition is a group of about 20 trade associations representing retailers, restaurants, supermarkets, drug stores, convenience stores, gas stations, on-line merchants and other businesses that accept debit and credit cards. MPC is fighting for a more competitive and transparent card system that works better for consumers and merchants alike. The coalition's member associations collectively represent about 2.7 million locations with approximately 50 million employees.
[Source: Merchants Payments Coalition]
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