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]