Tuesday, November 28, 2006

"Retailers Launch Action Against Credit Card Companies" (The National Business Review)

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While your funds are quickly withdrawn from your bank account, the retailer, nonprofit organization and other entities offering electronic payments face a host of wide-ranging fees.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."

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]

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]

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]

"London Gets Ready for Contactless Payments" (The Inquirer)

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]

Friday, November 24, 2006

"The Small Print on Gift-Card Fees" (WSJ)

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]

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]

Monday, November 20, 2006

Animation: "It's Always Christmas Time For... Visa" (Consumers Union Action Fund, Inc.)

"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]

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)

"National Restaurant Association Comments on Announcement that Visa® Will Publish Interchange Fee Schedule on Web Site" (NRA)

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)

'Debit-Card Fees Mask Bank-Sponsored Scheme,' Warns WayTooHigh.com -- The Credit Card Interchange Report

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)

"Are You Being Served" (Monash Business Review)

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]

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]

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]

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]

"Merchants Confront Credit Card Companies" (Times Union)

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]

"Credit Relief is Past Due" (Convenience Store Decisions)

"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]

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]

"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]

Sunday, November 12, 2006

"Interchange" a Misunderstood Term (WayTooHigh.com)

Most credit and debit cardholders are unaware that there is a merchant interchange fee charged whenever a company processes a debit or credit card for payment. While these fees vary amongst providers, it is based on the interchange rate dictated by Visa® and MasterCard®.

A primary mission of WayTooHigh.com - The Credit Card Interchange Report is to draw attention to what has become a $30 billion dollar annual tax on retailers and consumers.

Interchange fees are anything but an innocuous expense. It adds up and is misunderstood. Rather than calling these hidden taxes an "interchange" fee, a better description is a simply a tax or surcharge that is mandated by the credit card associations and banking cartel.

Click here for more background

[Commentary: WayTooHigh.com]

Saturday, November 11, 2006

In Tribute - Five Years Ago Today

On Veteran's Day, 2001, the co-founders of 30 Minute Photos Etc. were in New York City on a mission to support the airlines and commerce in the Big Apple. It was Veteran's Day, Nov. 11, 2001. This marked two months to the day since Sept. 11, 2001. In tribute, we pause. To view the trip, click here.

Friday, November 10, 2006

Background News on 30 Minute Photos Etc.

Thursday, November 09, 2006

We Pause to Remember Ed Bradley

Several years ago we had the privilege of meeting Mr. Bradley in Las Vegas during his keynote address to the Photo Marketing Association's international convention. His advocacy and inspiration, especially for African-American youth is something we will always remember. Mr. Bradley was a pioneering black American journalist. He was part of all our families, on Sunday night and every day.

"Visa, MasterCard in N.Z. Regulator Price-Fixing Suit" (Bloomberg)

Excerpt: Visa International Inc., the world's biggest credit-card company, and second-largest MasterCard International Inc., are among companies named in a suit by New Zealand's antitrust regulator over alleged price fixing. ... It alleges that fixing of interchange fees, which account for as much as 1.8 percent of each transaction, is anti- competitive. Retailers aren't allowed to recover the fee from card users and generally recoup the cost by increasing prices to all customers, the regulator said.

[Source: Bloomberg]
ALERT: European union hearings on MasterCard planned for november 14th

"Commission Alleges Credit Card Price-fixing" (Stuff.co.nz)

"The [New Zealand] Commerce Commission has issued civil proceedings against Visa, MasterCard and 11 financial institutions for alleged price-fixing in relation to interchange fees.
The commission said it filed a statement of claim in the High Court in Wellington yesterday, alleging that fixing the interchange fees was anti-competitive."

[source: Stuff.co.nz]

Saturday, November 04, 2006

"Charging Forward" (Orange County Register)

Friday, November 03, 2006

Every Credit and Debit Card Receipt Should Include Interchange Charge (WayTooHigh.com)

[originally posted on Jan 23, 2006. It took nine months for Visa and MasterCard to respond by posting interchange fees on their websites, now can they take the next few days and add the exact rates to every debit and credit card receipt? To liberally paraphrase Oliver Wendell Holmes Jr. who said, “a page of history is worth a volume of logic,” posting the exact interchange fee on all charge receipts is worth a volume of confusing fee schedules cloaked within dozens of website pages. The below original commentary was from last January].

There should be complete disclosure of each total merchant interchange fee as a separate line item on every consumer charge receipt. This crystal-clear posting of the exact interchange charge (in dollars and as a percent of the total sale) is being recommended by WayTooHigh.com - The Credit Card Interchange Report.

While merchants insist the nearly one-hundred separate, bank-imposed, interchange fees are a hidden tax on consumers, Visa and MasterCard explain otherwise. This simple and immediate resolution to this argument that it is a hidden tax is to show consumers exactly what they paid to the banks from each purchase when they use their credit and debit cards.

Until the interchange litigation is resolved, WayTooHigh.com - The Credit Card Interchange Report is recommending that the credit card companies voluntarily disclosure and make transparent the actual, total interchange fee and percent of the total transaction charged for each purchase. This dollar amount and percent figure should be clearly imprinted on all electronic credit card receipts.

This single line item on every electronic credit and debit card receipt should be identified as the "bank processing fee" to create a more transparent understanding of interchange fees. Unlike all other costs-of-goods-sold, this single charge is the one that results from horizontal price-fixing where merchants have little or no ability to negotiate. These postings on every receipt will enable merchants to understand exactly how much is paid to process each transaction. And, candidly it will also enrage consumers too, who are unfamiliar with this charge. Posting the interchange fee on every receipt will swiftly prove the growing argument that these illegal, price-fixing fees and its annual $25 billion burden is a "hidden tax on consumers." Just as sales tax is identified as a separate line item, this too will spark greater consumer awareness and better disclosure these interchange fees.

How about it Visa® and MasterCard®?

[source: WayTooHigh.com]