Wednesday, November 15, 2006

No Interchange Fee on Gift Cards (

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.