Windfall Profits for the Credit Card Companies This Weekend: Credit Card Companies to Rake in Millions This Weekend at the Pump at the Expense of Holiday Travelers
WASHINGTON, May 25 /PRNewswire/ -- The Merchants Payments Coalition (MPC) said today that with more than 31 million Americans driving for the Memorial Day holiday, credit card companies stand to make millions this weekend from credit card fees at the gas pump.
In a recent survey by the Travel Industry Association and AAA, it was estimated that 31.4 million Americans are expected to drive 50 miles or more from their homes this coming weekend. Consumers know they are paying near- record high prices for gasoline from coast to coast, but what they don't know is that credit card companies are raking in windfall profits as gas prices rise. When they go to the gas pump this weekend, they will be paying credit card companies a massive "hidden" credit card interchange fee that goes up each time the price of gas goes up.
Last year, credit card fees cost the convenience store industry, which sells an estimated three-quarters of all the fuel purchased in the country, a staggering $5.3 billion, making the credit card companies silent profiteers as gas prices escalate.
"We share consumers' frustrations over high gas prices. When prices rise, credit card companies actually charge retailers more per gallon for selling gas, a cost that affects every American purchasing fuel," said Hank Armour, president and CEO of the National Association of Convenience Stores (NACS) and a member of the MPC. "In fact, Visa and MasterCard are often making more on each gallon of gas sold than the retailer actually selling the gas. That's wrong."
Credit card interchange fees are a percentage of each transaction -- sometimes accompanied by a flat fee -- that Visa and MasterCard banks collect from retailers every time credit or debit cards are used to pay for a purchase. This fee averages close to 2 percent. Total credit and debit card interchange collected by Visa and MasterCard in 2004 amounted to $26.7 billion, according to the Nilson Report, a business magazine that covers the credit card industry.
"These credit card interchange fees unnecessarily cost American consumers billions of dollars every year, making the credit card companies silent 'winners' when gas prices increase," said Armour. "And the most egregious part about this particular credit card fee is that unlike the endless list of other credit card fees such as late fees, over-the-limit fees, inactivity fees, and balance-transfer fees, most American consumers don't even know they are paying it."
"The amount of credit card interchange fees collected has nearly doubled over the past 10 years despite the fact that the technology used to process credit card transactions has become more efficient and less expensive," Armour said. "Congress and other state and federal regulatory agencies should closely examine all of these credit card fees. Like all consumers, we are fed up with these fees -- which help pay for Visa and MasterCard's endless junk mail and solicitations to target vulnerable teens and seniors with credit card come- ons."
The Merchants Payments Coalition is a group of 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. The coalition's member associations collectively represent about 2.7 million stores with approximately 50 million employees.
[Source: Merchants Payments Coalition]
