Wednesday, January 31, 2007
Tuesday, January 30, 2007
"A Lifetime of Photos on a Single Disc" (WSJ, subscription required)
30 Minute Photos Etc. featured in Wednesday's Wall Street Journal.
The month comes to a close with a feature profile on our company in the Wall Street Journal. We have long advocated that with technology should come lower prices. What use to cost consumers $5.00 is now 5-cents. 30 Minute Photos Etc. created this new photo imaging business model and has long been advocates for cutting edge initiatives; the most well known is as lead plaintiff in the multi-billion dollar merchant interchange antitrust litigation.
Click here to read the WSJ article, subscription required
[Source: WayTooHigh.com]
The month comes to a close with a feature profile on our company in the Wall Street Journal. We have long advocated that with technology should come lower prices. What use to cost consumers $5.00 is now 5-cents. 30 Minute Photos Etc. created this new photo imaging business model and has long been advocates for cutting edge initiatives; the most well known is as lead plaintiff in the multi-billion dollar merchant interchange antitrust litigation.
Click here to read the WSJ article, subscription required
[Source: WayTooHigh.com]
Monday, January 29, 2007
Saturday, January 27, 2007
Anatomy of an Interchange Charge (WayTooHigh.com)
Just moments ago, a retail customer at 30 Minute Photos Etc. presented us with their debit card; however, the electronic payment card terminal was unable to process their transaction.
This typically is caused due to a faulty magnetic strip on the card. What does this mean to retailers? The transaction had to be manually keyed into the terminal at the signature card, non-PIN rate. And there are more fees too. Because we were unable to swipe the card, a higher interchange fee was imposed. And then an even higher fee because the card terminal prompted us for the street and zip code cardholder's information. If you do not enter that information, there is an even higher fee. Because the transaction with the customer was delayed, we did not want to further inconvenience the shopper by asking for the street and zip code information as well. Just another day in the interchange fee battle.
[Source: commentary, WayTooHigh.com]
This typically is caused due to a faulty magnetic strip on the card. What does this mean to retailers? The transaction had to be manually keyed into the terminal at the signature card, non-PIN rate. And there are more fees too. Because we were unable to swipe the card, a higher interchange fee was imposed. And then an even higher fee because the card terminal prompted us for the street and zip code cardholder's information. If you do not enter that information, there is an even higher fee. Because the transaction with the customer was delayed, we did not want to further inconvenience the shopper by asking for the street and zip code information as well. Just another day in the interchange fee battle.
[Source: commentary, WayTooHigh.com]
Citibank® Debit MasterCard's® Unfriendly "Journey." (WayTooHigh.com)
Although Citibank® is not the only financial institution offering creative gimmicks to incentivise cardholders to use their debit cards at the much higher credit card interchange rates, their program is a portrait of how their cartel is reaping billions of dollars at the expense of merchants and consumers who pay supra-competitively priced interchange fees.
We just heard of a new Citibank Debit MasterCard® program called: "Life is a journey. Bring your companion." How it works: Make three purchases for more than $30 each during February and you can receive a complimentary companion airline ticket. Great deal - $90 in purchases and a free airline ticket?
Here is the catch, according to the mailed solicitation: "when you make a purchase press 'credit' and sign. That's all there is to it."
What is not mentioned is that even though cardholders choose to complete the transaction at a typically much higher signature card interchange rate, the funds are still instantly vacuumed from their bank account. The banks get the cash instantly and the merchants are also taken on a ride - they are forced to pay much higher percent-of-sale interchange rates. Programs like this may be what Senator Christopher Dodd (D- CT) had in mind when last week he addressed interchange issues during a Washington hearing.
The Citibank N.A. offer makes this program appear so simple, use your debit card as a credit card, charge more than $30 for three separate purchases and you receive a complimentary companion ticket. It is no wonder the credit card association's and their member banks are bilking retailers so much, the fees paid to reward programs is big business.
According to an article in Digital Transactions, a report by Diamond Management & Technology Consultants identified that rewards account for 44% of total interchange costs.
Even with this travel program, don't pack your bags so quickly. In tiny magnifying glass-sized print, cardholders are advised that "you will receive a registration package for a companion ticket within 150 days of the end of the promotion" [5 months afterwards].
The solicitation explain that you "debit card means no interest. Although your debit card looks like a credit card, it acts entirely differently. Purchases are taken directly out of your checking account so there's no interest to pay, ever." What is missing is that when you comply with the bank's requirement that you force the merchant to accept your card at the much higher signature card rate, you too are faced with paying an additional hidden tax. If the banks believed in full transparency, they would explain that retailers are forced to pay higher fees.
How can they get away with such unbridled greed?
When you operate a cartel that controls 80% of the market and you set fees by agreement, you can do exactly that.
[Editors note: MasterCard and Citibank N.A. are among the named defendants in the Payment Card Interchange Fee and Merchant Discount Antitrust Litigation in which 30 Minute
Photos Etc. is the lead plaintiff].
[Source: WayTooHigh.com]
We just heard of a new Citibank Debit MasterCard® program called: "Life is a journey. Bring your companion." How it works: Make three purchases for more than $30 each during February and you can receive a complimentary companion airline ticket. Great deal - $90 in purchases and a free airline ticket?
Here is the catch, according to the mailed solicitation: "when you make a purchase press 'credit' and sign. That's all there is to it."
What is not mentioned is that even though cardholders choose to complete the transaction at a typically much higher signature card interchange rate, the funds are still instantly vacuumed from their bank account. The banks get the cash instantly and the merchants are also taken on a ride - they are forced to pay much higher percent-of-sale interchange rates. Programs like this may be what Senator Christopher Dodd (D- CT) had in mind when last week he addressed interchange issues during a Washington hearing.
The Citibank N.A. offer makes this program appear so simple, use your debit card as a credit card, charge more than $30 for three separate purchases and you receive a complimentary companion ticket. It is no wonder the credit card association's and their member banks are bilking retailers so much, the fees paid to reward programs is big business.
According to an article in Digital Transactions, a report by Diamond Management & Technology Consultants identified that rewards account for 44% of total interchange costs.
Even with this travel program, don't pack your bags so quickly. In tiny magnifying glass-sized print, cardholders are advised that "you will receive a registration package for a companion ticket within 150 days of the end of the promotion" [5 months afterwards].
The solicitation explain that you "debit card means no interest. Although your debit card looks like a credit card, it acts entirely differently. Purchases are taken directly out of your checking account so there's no interest to pay, ever." What is missing is that when you comply with the bank's requirement that you force the merchant to accept your card at the much higher signature card rate, you too are faced with paying an additional hidden tax. If the banks believed in full transparency, they would explain that retailers are forced to pay higher fees.
How can they get away with such unbridled greed?
When you operate a cartel that controls 80% of the market and you set fees by agreement, you can do exactly that.
[Editors note: MasterCard and Citibank N.A. are among the named defendants in the Payment Card Interchange Fee and Merchant Discount Antitrust Litigation in which 30 Minute
Photos Etc. is the lead plaintiff].
[Source: WayTooHigh.com]
"Merchants Protest Credit-transaction Fees" (The Sun News)
"Visa and MasterCard made $30.7 billion in 2005 by charging merchants a percentage of each credit card transaction. The National Retail Federation also estimates that those earnings will climb to the $40 billion range for 2006, and the retail industry is joining forces with politicians to discuss restrictions on credit card companies..."
[Source: The Sun News]
[Source: The Sun News]
Thursday, January 25, 2007
"Merchants Applaud Congressional Call for Disclosure from Credit Card Industry" (MPC)
WASHINGTON, Jan. 25 /PRNewswire-USNewswire/ -- The Merchants Payments Coalition (MPC) Legislative Committee Chairwoman Jennifer Hatcher today issued the following statement based on comments from Senator Christopher Dodd (D- CT), Chairman of the Senate Committee on Banking, Housing and Urban Affairs, at this morning's Hearing titled "Examining the Billing, Marketing, and Disclosure Practices of the Credit Card Industry and Their Impact on Consumers."
"We applaud the efforts of Senator Dodd (D-CT), who called for heightened scrutiny into the credit card industry and will be holding a series of hearings in coming months to investigate further among other topics the practice of hidden credit and debit card 'interchange fees.' The credit card companies have long profited from placing hidden fees and practices on unsuspecting merchants and consumers.
The interchange fee is the biggest fee consumers have never heard of and accounts for more than the total of all other consumer fees such as late fees and over-the-limit fees.
Last year, Visa and MasterCard generated more than $30 billion in credit and debit card interchange fees -- a fee set in secret by Visa and MasterCard and imposed on merchants and consumers by the credit card industry and completely hidden from consumers."
The MPC, a group of nearly 30 associations representing retailers, supermarkets, drug stores, convenience stores, fuel stations, on-line merchants and other businesses that accept debit and credit cards are 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 stores with approximately 50 million employees. For further information, please visit http://www.unfaircreditcardfees.com
[Source: via Merchants Payments Coalition news release]
"We applaud the efforts of Senator Dodd (D-CT), who called for heightened scrutiny into the credit card industry and will be holding a series of hearings in coming months to investigate further among other topics the practice of hidden credit and debit card 'interchange fees.' The credit card companies have long profited from placing hidden fees and practices on unsuspecting merchants and consumers.
The interchange fee is the biggest fee consumers have never heard of and accounts for more than the total of all other consumer fees such as late fees and over-the-limit fees.
Last year, Visa and MasterCard generated more than $30 billion in credit and debit card interchange fees -- a fee set in secret by Visa and MasterCard and imposed on merchants and consumers by the credit card industry and completely hidden from consumers."
The MPC, a group of nearly 30 associations representing retailers, supermarkets, drug stores, convenience stores, fuel stations, on-line merchants and other businesses that accept debit and credit cards are 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 stores with approximately 50 million employees. For further information, please visit http://www.unfaircreditcardfees.com
[Source: via Merchants Payments Coalition news release]
Summary: Briefing on Interchange Issues (WayTooHigh.com)
This marks our 625th posting on WayTooHigh.com - The Credit Card Interchange Report.
The daily news and commentary updates are edited by entrepreneurs who know first hand about all the issues, as we are also the lead plaintiffs in the interchange battle (the first to file, back in June, 2005) .
Earlier today, Senator Christopher Dodd (D- CT) provided an opening statement during hearings in Washington that including mention that the "costs associated with these fees are expected to be between $30 and $40 billion this year alone."
As background for our growing universe of international readers, we are providing the following summary as an overview of the interchange fee issues impacting consumers and retailers. This informational web site was created to provide news and commentary updates only. None of the information posted on WayTooHigh.com is intended to constitute legal arguments; it reflects only the opinions of its co-editors and not of any other plaintiffs or other parties involved in the merchant antitrust litigation. The information is not guaranteed to be correct, complete, or current. We make no warranty, express or implied, about the accuracy or reliability of the information posted by WayTooHigh.com or at any other Web site to which this site is linked.
Summary
Interchange fees are the hidden fee collected by Visa® and MasterCard®-issuing banks every time a Visa or MasterCard cardholder makes a purchase with their credit or debit card. Annually, these issuing banks collect interchange fees totaling more than $30 billion in the U.S. alone. Although the Visa and MasterCard-issuing banks are ostensibly in competition with one-another, they do no compete on the interchange fees they charge. Instead, they set interchange fees collectively, which is a clear violation of U.S. Antitrust laws.
Along with millions of other merchants, we believe that, absent collusion between the issuing banks, interchange fees would be much lower. The average rate in the U.S. is 1.7%, in Australia it is .55% and in the UK it is just .7%. In Canada, the interchange fee for PIN-based debit cards is zero, just as are charges for check writing, although there are significant costs to clear and process paper checks. Our hope is that the judge will rule that "fixed interchange" is illegal, allowing for market competition between the issuing banks that will result in lower interchange fees. This will benefit all U.S. merchants and consumers (lower merchant costs translate to lower consumer prices). We are also seeking damages for the harm already inflicted on merchants by Visa, MasterCard, and their issuing banks in the form of the existing, artificially-high interchange fees.
[Commentary: WayTooHigh.com]
The daily news and commentary updates are edited by entrepreneurs who know first hand about all the issues, as we are also the lead plaintiffs in the interchange battle (the first to file, back in June, 2005) .
Earlier today, Senator Christopher Dodd (D- CT) provided an opening statement during hearings in Washington that including mention that the "costs associated with these fees are expected to be between $30 and $40 billion this year alone."
As background for our growing universe of international readers, we are providing the following summary as an overview of the interchange fee issues impacting consumers and retailers. This informational web site was created to provide news and commentary updates only. None of the information posted on WayTooHigh.com is intended to constitute legal arguments; it reflects only the opinions of its co-editors and not of any other plaintiffs or other parties involved in the merchant antitrust litigation. The information is not guaranteed to be correct, complete, or current. We make no warranty, express or implied, about the accuracy or reliability of the information posted by WayTooHigh.com or at any other Web site to which this site is linked.
Summary
Interchange fees are the hidden fee collected by Visa® and MasterCard®-issuing banks every time a Visa or MasterCard cardholder makes a purchase with their credit or debit card. Annually, these issuing banks collect interchange fees totaling more than $30 billion in the U.S. alone. Although the Visa and MasterCard-issuing banks are ostensibly in competition with one-another, they do no compete on the interchange fees they charge. Instead, they set interchange fees collectively, which is a clear violation of U.S. Antitrust laws.
Along with millions of other merchants, we believe that, absent collusion between the issuing banks, interchange fees would be much lower. The average rate in the U.S. is 1.7%, in Australia it is .55% and in the UK it is just .7%. In Canada, the interchange fee for PIN-based debit cards is zero, just as are charges for check writing, although there are significant costs to clear and process paper checks. Our hope is that the judge will rule that "fixed interchange" is illegal, allowing for market competition between the issuing banks that will result in lower interchange fees. This will benefit all U.S. merchants and consumers (lower merchant costs translate to lower consumer prices). We are also seeking damages for the harm already inflicted on merchants by Visa, MasterCard, and their issuing banks in the form of the existing, artificially-high interchange fees.
[Commentary: WayTooHigh.com]
Opening Statement by Senator Christopher Dodd (D- CT), Chairman of the Senate Committee on Banking, Housing and Urban Affairs (U.S. Senate Website)
OPENING STATEMENT OF CHAIRMAN CHRIS DODD - HEARING TO EXAMINE THE BILLING, MARKETING, AND DISCLOSURE PRACTICES OF THE CREDIT CARD INDUSTRY, AND THEIR IMPACT ON CONSUMERS
See excerpt from opening statement below:
...But I would like to put the credit card industry, issuing banks and card associations on notice. If you currently engage in any business practice that you would be ashamed to discuss before this Committee, I would strongly encourage you to cease and desist that practice. Irrespective of the current legality of such practices, you should take a long, hard look at how you treat your customers, both in the short term and the long term.
And lastly, I would be remiss if I did not mention one issue likely not to be explored today-- credit card interchange fees. These fees are imposed on merchants and consumers by banks and card associations when a credit or debit card is used to pay for a purchase. Interchange fees are growing exponentially– and the costs associated with these fees are expected to be between $30 and $40 billion this year alone. These opaque fees, assessed on merchants, are passed on, in part or whole, to consumers who have no knowledge or understanding that a fee is even a part of the cost of bread or milk, or any other consumer product.
I believe that this is another area that this Committee should examine as part of the series of hearings on credit cards.
[Via U.S. Senate Hearing, click here for link]
See excerpt from opening statement below:
...But I would like to put the credit card industry, issuing banks and card associations on notice. If you currently engage in any business practice that you would be ashamed to discuss before this Committee, I would strongly encourage you to cease and desist that practice. Irrespective of the current legality of such practices, you should take a long, hard look at how you treat your customers, both in the short term and the long term.
And lastly, I would be remiss if I did not mention one issue likely not to be explored today-- credit card interchange fees. These fees are imposed on merchants and consumers by banks and card associations when a credit or debit card is used to pay for a purchase. Interchange fees are growing exponentially– and the costs associated with these fees are expected to be between $30 and $40 billion this year alone. These opaque fees, assessed on merchants, are passed on, in part or whole, to consumers who have no knowledge or understanding that a fee is even a part of the cost of bread or milk, or any other consumer product.
I believe that this is another area that this Committee should examine as part of the series of hearings on credit cards.
[Via U.S. Senate Hearing, click here for link]
Wednesday, January 24, 2007
Reminder: EU Credit Card Decision Expected Next Week (WayTooHigh.com)
The EU Commission decision on fees for credit-card operations is expected to be made public on January 31, 2007.
[Source: WayTooHigh.com]
[Source: WayTooHigh.com]
U.S. Senate Banking Committee Hearing (WayTooHigh.com)
Click here for information on the U.S. Senate Committee on Banking, Housing, and Urban Affairs Titled: “Examining the Billing, Marketing, and Disclosure Practices of the Credit Card Industry, and Their Impact on Consumers.”
[via U.S. Senate Hearing Schedule]
[via U.S. Senate Hearing Schedule]
Shouldn't Technology Lower Interchange Costs? (WayTooHigh.com)
We have long advocated that technology increases efficiencies and helps lower costs. That is unless you have a service that is controlled by unbridled collusion and (allegedly) illegal price-fixing by agreement.
Another example is our newest service launched today. Just one year ago, we were charging up to $5.00 to scan a single photograph. Then, with the application of new Kodak imaging high-speed scanners and Kodak Capture software, we designed a new flat-rate scanning service for just $49.95 to scan up to 1,000 photos, instantly! That was fast and garnered great media buzz and excitement at the recent Consumer Electronics Show educational panel which we addressed.
We mentioned that like most services today, everything must be effortless, instant and inexpensive. That raises the question of why our independent photo specialty retail and national online boutique photo service can employ technology and entrepreneurial smarts to create an entirely new market and share extraordinary saving with our customers, while the credit card association's continue to raise their fees?
For us, 1,000 photo scans for $49.95 was old news. Now, we just launched ScanMyPhotos.com for unlimited photo scanning where you "fill-the-box" and get prepaid round-trip delivery too for just $99.95. More info, click here.
If we can continually create new cost savings and efficiently help consumers, why can't Visa and MasterCard?
[Source: commentary, WayTooHigh.com]
Another example is our newest service launched today. Just one year ago, we were charging up to $5.00 to scan a single photograph. Then, with the application of new Kodak imaging high-speed scanners and Kodak Capture software, we designed a new flat-rate scanning service for just $49.95 to scan up to 1,000 photos, instantly! That was fast and garnered great media buzz and excitement at the recent Consumer Electronics Show educational panel which we addressed.
We mentioned that like most services today, everything must be effortless, instant and inexpensive. That raises the question of why our independent photo specialty retail and national online boutique photo service can employ technology and entrepreneurial smarts to create an entirely new market and share extraordinary saving with our customers, while the credit card association's continue to raise their fees?
For us, 1,000 photo scans for $49.95 was old news. Now, we just launched ScanMyPhotos.com for unlimited photo scanning where you "fill-the-box" and get prepaid round-trip delivery too for just $99.95. More info, click here.
If we can continually create new cost savings and efficiently help consumers, why can't Visa and MasterCard?
[Source: commentary, WayTooHigh.com]
Tuesday, January 23, 2007
Forcing Credit Card "Convienence" Fees (WayTooHigh.com)
Imagine if 30 Minute Photos Etc. tacked on a 2% or 2.5% "convenience" fee for all our ecommerce and retail customer charge transactions? This would be in violation of our agreement with Visa® and MasterCard®, as we are disallowed from adding a surcharge to cover electronic payments. [See MasterCard's 268 page "merchant rules manual"].
However, while retailers are precluded from passing on the interchange fee, municipalities regularly do exactly that. When you pay property taxes with a credit card, the cities force people to pay an extra fee. If you use a debit card, the funds are instantly deducted from you account, yet the municipalities still get that added revenue.
Take a look at three examples:
Orange County, California
Lynchburg, Virginia
Lexington County, South Carolina
[Source: WayTooHigh.com]
However, while retailers are precluded from passing on the interchange fee, municipalities regularly do exactly that. When you pay property taxes with a credit card, the cities force people to pay an extra fee. If you use a debit card, the funds are instantly deducted from you account, yet the municipalities still get that added revenue.
Take a look at three examples:
Orange County, California
Lynchburg, Virginia
Lexington County, South Carolina
[Source: WayTooHigh.com]
Feedback From Franchisee at Giant Fast Food Chain (WayTooHigh.com)
It wasn't just our presence at CES that drew cheers from entrepreneurial supporters, just today we heard from another important customer. A very sweet lady brought in a photograph to be restored and then explained how much she has enjoyed reading about our many years of civic activism and appreciation for our role as class representative in the merchant interchange battle against Visa® and MasterCard®.
Her own experiences were consequential and added more fuel to our quest because she is a franchisee - owning several fast food restaurants with one of the world's largest chains. According to her, the average sale at her company is about $3.50 and she is now forced to accept all major credit cards. Some key points from our discussion were that the availability of credit cards have led to no appreciable increase in sales and she had to hire an extra bookkeeper just to track all the statements and charges from the card associations. She seemed very connected to the fast food restaurant industry and mentioned that it is not just her, but other franchisees and owners who cannot tolerate the cards; it is too costly. Her staff is trained to ask if it is a debit or credit card, but often she is forced to pay the higher signature card rates anyway.
She explained the acceptance of credit cards are much like "green fees" at a golf club; it is something that they have to pay but provides little benefit, especially because most patrons are spending just a few dollars and have cash anyway. While Visa and MasterCard will challenge these statistics, take it from a franchisee owner who knows her market and business.
But, it is not just fast food, as she mentioned that a local service station is regularly accepting charge cards for items as small as a pack of gum. Take a look at today's Wachovia and Bank of America quarterly results if you want more insights into just how profitable interchange fees are.
[Source: WayTooHigh.com]
Her own experiences were consequential and added more fuel to our quest because she is a franchisee - owning several fast food restaurants with one of the world's largest chains. According to her, the average sale at her company is about $3.50 and she is now forced to accept all major credit cards. Some key points from our discussion were that the availability of credit cards have led to no appreciable increase in sales and she had to hire an extra bookkeeper just to track all the statements and charges from the card associations. She seemed very connected to the fast food restaurant industry and mentioned that it is not just her, but other franchisees and owners who cannot tolerate the cards; it is too costly. Her staff is trained to ask if it is a debit or credit card, but often she is forced to pay the higher signature card rates anyway.
She explained the acceptance of credit cards are much like "green fees" at a golf club; it is something that they have to pay but provides little benefit, especially because most patrons are spending just a few dollars and have cash anyway. While Visa and MasterCard will challenge these statistics, take it from a franchisee owner who knows her market and business.
But, it is not just fast food, as she mentioned that a local service station is regularly accepting charge cards for items as small as a pack of gum. Take a look at today's Wachovia and Bank of America quarterly results if you want more insights into just how profitable interchange fees are.
[Source: WayTooHigh.com]
"BofA Profit Surges on Card Growth" (The Street.com)
BofA Quarterly highlights via Edgar online
- Debit card revenue increased 23 percent to a record $1.91 billion.
- During 2006, the company acquired and successfully integrated MBNA Corporation, making Bank of America the largest credit card issuer in the U.S. and U.K.
- Fourth quarter net income for Global Consumer and Small Business Banking rose 44 percent to $2.53 billion from the year earlier period. Revenue in the period increased 46 percent to $10.63 billion, driven primarily by higher credit card income, including the addition of MBNA, and service charges.
Thursday, January 18, 2007
Wednesday, January 17, 2007
(repost) "Credit Card Companies Fear 'Perfect Storm'" (ConsumerAffairs.com)
As background, repost, May 3, 2006, via ConsumerAffairs.com
(repost) "Millions of Retailers Across the Nation Enter Battle Against Banks' Credit Card Associations" (CSN)
As background, repost from Sept 30, 2005. via Convenience Store News.
Confusing Debit Cards (WayTooHigh.com)
After Tuesday's front-page Wall Street Journal article on debit cards, we were concerned that cardholders might not be familiar with the varied schemes employed by Visa® and MasterCard®. The card designs are increasingly more confusing and leading towards misidentifying PIN vs. Signature cards.
Just moments ago, a customer presented us at our retail photo center (30 Minute Photos Etc.) with one of the most disingenuous debit card designs yet. The word "debit" was nearly invisible and imprinted within the hologram. That trick is something we have been familiar with, but it was the other placement that elevated our dismay. The word "debit" was vertically imprinted on the center on the left side of the card in tiny lettering and in black which was nearly indistinguishable from the other graphics on the card.
Why is this so important?
The card associations are encouraging consumers to use debit cards, which instantly deduct funds from their bank account, but then use creative marketing and card designs to force merchants to accept the electronic payments at the much higher percent-of-sale rates. The banks' risk is limited; they receive immediate payment, yet charge U.S. merchants what amounts to among the highest interchange rates in the world.
Click here for more info.
[commentary: WayTooHigh.com]
Just moments ago, a customer presented us at our retail photo center (30 Minute Photos Etc.) with one of the most disingenuous debit card designs yet. The word "debit" was nearly invisible and imprinted within the hologram. That trick is something we have been familiar with, but it was the other placement that elevated our dismay. The word "debit" was vertically imprinted on the center on the left side of the card in tiny lettering and in black which was nearly indistinguishable from the other graphics on the card.
Why is this so important?
The card associations are encouraging consumers to use debit cards, which instantly deduct funds from their bank account, but then use creative marketing and card designs to force merchants to accept the electronic payments at the much higher percent-of-sale rates. The banks' risk is limited; they receive immediate payment, yet charge U.S. merchants what amounts to among the highest interchange rates in the world.
Click here for more info.
[commentary: WayTooHigh.com]
Tuesday, January 16, 2007
"As Credit Card Fees Climb, Merchants Push PINs" (WSJ, Subscription required)
Robin Sidel reports in today's WSJ (Jan 16, p-1) about the interchange fees for credit and debit cards and how retailers are pressing consumers to use PIN cards. However, the banks are using marketing campaigns and promotions to counter by incentivising cardholders to use signature cards so they can enter contests and earn rewards.
Read more.
[Source: Via WSJ, Subscription required]
Read more.
[Source: Via WSJ, Subscription required]
Monday, January 15, 2007
"EU Move to Ban Card Fees Would Hurt Consumers, Visa Europe Says" (BBJ)
According to Hungary’s leading English-language business weekly, Budapest Business Journal, Visa Europe's CEO commented to journalists in Brussels that they must resolve legal questions this year about the fees known as interchange.
The article refers to Competition Commissioner Neelie Kroes vowing last year to fine card companies unless they changed their business practices. In our opinion, pawning off their legal liabilities onto the public through IPO's and other games, like covertly posting interchange rates on its website, and limiting interchange fees at the gas pumps are all window dressing. The real issue remains that the two leading card associations stand accused (by us and many others) of anti competitive and illegal price-fixing by agreement violations.
[Source: WayTooHigh.com via Budapest Business Journal]
The article refers to Competition Commissioner Neelie Kroes vowing last year to fine card companies unless they changed their business practices. In our opinion, pawning off their legal liabilities onto the public through IPO's and other games, like covertly posting interchange rates on its website, and limiting interchange fees at the gas pumps are all window dressing. The real issue remains that the two leading card associations stand accused (by us and many others) of anti competitive and illegal price-fixing by agreement violations.
[Source: WayTooHigh.com via Budapest Business Journal]
Thursday, January 11, 2007
"Credit-Card Solicitations Are Full of Naughty Surprises" (MarketWatch)
Excerpt: "Banks are counting on the fact that they will get increased interchange income from merchants, which can run as much as 5 percent per transaction..."
(Source: MarketWatch)
(Source: MarketWatch)
Lowering the Interchange Fee Cap at the Pumps? (WayTooHigh.com)
Was it an arbitrary number MasterCard® used to identify the interchange fee cap at the pumps last fall? Motorists were limited to paying fees on only the first $50 per fill-up at the pumps. But, as gas prices have plunged to a 19-month low, will the card association recalibrate its pricing matrix and lower the cap at the pumps?
And, since this action presents more proof that they recognized interchange fees cost a fractional amount of what is forced on retailers, placing a limit on gas station fees raises additional questions. Such as, why are interchange fees at Cartier and high-end boutiques not also limited too? It seems that whether it is a tank of gas or fine jewelry, the same windfall profiteering and price fixing assertions can be made.
Will we now see an interchange fee cap of $25 per fill-up, or less?
[Source: commentary - WayTooHigh.com]
And, since this action presents more proof that they recognized interchange fees cost a fractional amount of what is forced on retailers, placing a limit on gas station fees raises additional questions. Such as, why are interchange fees at Cartier and high-end boutiques not also limited too? It seems that whether it is a tank of gas or fine jewelry, the same windfall profiteering and price fixing assertions can be made.
Will we now see an interchange fee cap of $25 per fill-up, or less?
[Source: commentary - WayTooHigh.com]
Why Interchange Fees Concern Retailers and Consumers (commentary: WayTooHigh.com)
Having just returned from the International Consumer Electronics Show in Las Vegas, there were several instances where I felt more like a rock star than an entrepreneur at the world's largest consumer technology trade event. There were lots of smiles and thumbs-up from those who were familiar with my role as lead plaintiff in the merchant interchange litigation. Business owners and even consumers were in our camp. Several people I ran into shared their own horror stories.
For me, the point of excessive interchange fees hit home during Michael Dell's Tuesday keynote presentation at the Venetian Hotel. At one point, he had "Doctor Evil," the character from the Austin Powers films appear on stage after a 30-year deep freeze. Doctor Evil showed Dell Computers' founder his 30-year-old computer and wanted to get his "crap" off the antiquated machine; Dell was introducing new products to preserve files stored on older model computers. I couldn't help but draw several analogies about credit card fees and the differences in technology and higher fees than from three decades ago when antiquated manual card imprinters were used.
As a speaker at CES, I addressed the future of the photo imaging industry, but throughout the show, many people I met were familiar with our litigation against Visa®, MasterCard® and its member banks. CES was not a very friendly place for the card associations, especially because it united retailers and ordinary shoppers together; both are impacted by these fees.
One observation I raised was how ironic it was that the nation's largest trade show just celebrated its 40th anniversary - it was founded in New York City in 1967. While the bulk of the products promoted at the show will be purchased with Visa or MasterCard (they control 80% of the market), the two leading card associations operate in a 1960's type-fee structure. Back then we were in a paper economy, today with technology, everything is digital, yet Visa and MasterCard's price structure is based on costs from 40-years-ago.
Click here for previous "Credit Card Interchange Fee Draw Criticism and Concern at CES" press release.
Overview of Interchange Issues:
For me, the point of excessive interchange fees hit home during Michael Dell's Tuesday keynote presentation at the Venetian Hotel. At one point, he had "Doctor Evil," the character from the Austin Powers films appear on stage after a 30-year deep freeze. Doctor Evil showed Dell Computers' founder his 30-year-old computer and wanted to get his "crap" off the antiquated machine; Dell was introducing new products to preserve files stored on older model computers. I couldn't help but draw several analogies about credit card fees and the differences in technology and higher fees than from three decades ago when antiquated manual card imprinters were used.
As a speaker at CES, I addressed the future of the photo imaging industry, but throughout the show, many people I met were familiar with our litigation against Visa®, MasterCard® and its member banks. CES was not a very friendly place for the card associations, especially because it united retailers and ordinary shoppers together; both are impacted by these fees.
One observation I raised was how ironic it was that the nation's largest trade show just celebrated its 40th anniversary - it was founded in New York City in 1967. While the bulk of the products promoted at the show will be purchased with Visa or MasterCard (they control 80% of the market), the two leading card associations operate in a 1960's type-fee structure. Back then we were in a paper economy, today with technology, everything is digital, yet Visa and MasterCard's price structure is based on costs from 40-years-ago.
Click here for previous "Credit Card Interchange Fee Draw Criticism and Concern at CES" press release.
Overview of Interchange Issues:
- Interchange fees have more than doubled in the last 10-years.
- Few customers know about interchange fees because it is virtually impossible for merchants to tell customers what the exact fee is.
- Every consumer pays for these hidden credit card fees, even cash customers because the cost is built into every product - a gallon of milk bought with cash by a mom is also paying to award premium signature card holders' bonus mileage to Europe.
- Interchange fees are one of the worst and most unfair fees paid by American consumers - it's more than six times what people paid in ATM fees.
- Visa and MasterCard control an 80% market share of the card market and control a system that is anti-competitive.
- Visa and MasterCard threw a bone to service stations and motorists last fall, after the peak summer driving season by capping fill-up interchange fees at $50. This was a hollow gesture and not very genuine, especially as fuel costs have recently subsequently plunged.
- Huge profits: Even though the actual cost to process a $1 transaction is virtually the same as that of a $10,000 transaction (buy a soda or a Cartier watch), the interchange fee is based on a percentage of the total. Even Realtors lowered their take when housing prices soared. The interchange fees are far higher than the actual cost o the transaction they are meant to pay for. The technology used to process credit card transactions are today more efficient and less expensive.
- Why are interchange rates higher in the U.S. in most other industrialized nations? U.S. interchange fees are close to 2%, while other countries, like the UK are typically 0.7% and Australia averages 0.55%.
- Did you know that merchants are forbidden from disclosing to consumers the fees that are charged?
- Behind closed doors, Visa and MasterCard meet to increase these anti-competitive hidden fees. We understand that these price-fixing practices are in violate antitrust laws.
- Few things are more anti-competitive than the credit card market - virtually every other marketplace lowers prices because of competition.
- Study the market dynamics of other counties with significantly lower interchange rates to understand that the banks and card association are still doing well and they have not experienced disruptions in transaction handling processes, despite lower rates.
- The banks which make up Visa and MasterCard have colluded to set these fees which in any other industry would be a clear violation of federal antitrust laws
- With a new consumer-friendly House, it will be interesting to see what actions Congress and the Senate might take in the coming months. [The Senate may launch a hearing of its own and we certainly would welcome an opportunity to share our retail and ecommerce experiences].
[Source: WayTooHigh.com]
"Polish Watchdog Gets Tough on Credit-card Fees" (EurActive.com)
"Competition watchdog OCCP has declared the fees that banks charge on transactions made with major credit cards as unlawful, in an effort to reduce costs for consumers."
Wednesday, January 10, 2007
Tuesday, January 09, 2007
Credit Card Interchange Fees Draw Criticism and Concern at CES (WayTooHigh.com)
Visa and MasterCard seen as major culprits in predatory credit card processing fees and practices
January 9, 2007, (Las Vegas, NV)—Credit card interchange fees and abusive practices were discussed at the 40th annual Consumer Electronics Show being held in Las Vegas, NV this week.
At the "Photography Fights Back!" panel discussion today, Mitch Goldstone, the president and CEO of 30 Minutes Photos Etc., discussed the challenges that face many business owners and consumers who use credit cards for purchases and payments. Interchange fees are a percentage of each transaction that Visa® and MasterCard® member banks collect from merchants every time their credit or debit cards are used to pay for a purchase.
The fee varies with the type of merchant transaction but the average is nearly 2 percent for most credit card purchases. Goldstone, in his comments, called on members of the house and Senate to seriously consider the potential benefits of oversight and regulation of these fees.
Speaking from the Venetian Hotel, where educational sessions for the Consumer Electronics Show is taking place, Goldstone commented, “What Visa and MasterCard are doing hurts the merchant, the consumer and in reality, the country. I find it ironic that we are here at the 40th anniversary of the Consumer Electronics Show and that the bulk of the products here will be purchased with credit cards that operate through a 1960’s fee structure.”
In 2005, U.S. consumers paid more than $30 billion in interchange fees when using MasterCard and Visa cards, double the amount they paid in ATM fees and late fees combined. Another odd aspect of interchange fees is that the United States pays the highest rate despite having the most advanced technology. For example, United Kingdom consumers pay roughly half the U. S. consumer rate, and Australian consumers pay a third. A recent survey also discovered that the United States and Canada are the only countries that have seen recent increases in interchange fees. Fees in the U.S. are among the highest for any industrialized nation and more than double many other countries.
“It’s no coincidence that U.S. consumers pay the highest rate as they are the most active card users. Other countries have recognized that the interchange fee is a hollow, almost punitive, processing fee that doesn’t cover any provided service,” said Goldstone, who is a lead plaintiff and class representative in the multi-billion dollar antitrust class-action litigation against Visa and MasterCard. “It made sense in the 60s, 70s and maybe even the 80s when paper transactions and human interactions and approvals were the norm. Today, the same transactions are approved and funds delivered within seconds, therefore there is no need or rationale for the fee.”
In an example of how interchange fees function, imagine a consumer making a $100 purchase with a credit card. For that $100 item, the retailer would get approximately $98. The remaining $2, known as the merchant discount or interchange (which is actually a fee), gets divided up. About $1.75 would go to the card issuing bank and $0.25 would go to the retailer's bank. Under the current structure, these fees are an unnecessary tax on merchants, consumers and burden economic growth.
Goldstone is also co-editor of WayTooHigh.com – The Credit Card Interchange Report which provides international daily news and community updates on interchange issues.
[Source: WayTooHigh.com]
January 9, 2007, (Las Vegas, NV)—Credit card interchange fees and abusive practices were discussed at the 40th annual Consumer Electronics Show being held in Las Vegas, NV this week.
At the "Photography Fights Back!" panel discussion today, Mitch Goldstone, the president and CEO of 30 Minutes Photos Etc., discussed the challenges that face many business owners and consumers who use credit cards for purchases and payments. Interchange fees are a percentage of each transaction that Visa® and MasterCard® member banks collect from merchants every time their credit or debit cards are used to pay for a purchase.
The fee varies with the type of merchant transaction but the average is nearly 2 percent for most credit card purchases. Goldstone, in his comments, called on members of the house and Senate to seriously consider the potential benefits of oversight and regulation of these fees.
Speaking from the Venetian Hotel, where educational sessions for the Consumer Electronics Show is taking place, Goldstone commented, “What Visa and MasterCard are doing hurts the merchant, the consumer and in reality, the country. I find it ironic that we are here at the 40th anniversary of the Consumer Electronics Show and that the bulk of the products here will be purchased with credit cards that operate through a 1960’s fee structure.”
In 2005, U.S. consumers paid more than $30 billion in interchange fees when using MasterCard and Visa cards, double the amount they paid in ATM fees and late fees combined. Another odd aspect of interchange fees is that the United States pays the highest rate despite having the most advanced technology. For example, United Kingdom consumers pay roughly half the U. S. consumer rate, and Australian consumers pay a third. A recent survey also discovered that the United States and Canada are the only countries that have seen recent increases in interchange fees. Fees in the U.S. are among the highest for any industrialized nation and more than double many other countries.
“It’s no coincidence that U.S. consumers pay the highest rate as they are the most active card users. Other countries have recognized that the interchange fee is a hollow, almost punitive, processing fee that doesn’t cover any provided service,” said Goldstone, who is a lead plaintiff and class representative in the multi-billion dollar antitrust class-action litigation against Visa and MasterCard. “It made sense in the 60s, 70s and maybe even the 80s when paper transactions and human interactions and approvals were the norm. Today, the same transactions are approved and funds delivered within seconds, therefore there is no need or rationale for the fee.”
In an example of how interchange fees function, imagine a consumer making a $100 purchase with a credit card. For that $100 item, the retailer would get approximately $98. The remaining $2, known as the merchant discount or interchange (which is actually a fee), gets divided up. About $1.75 would go to the card issuing bank and $0.25 would go to the retailer's bank. Under the current structure, these fees are an unnecessary tax on merchants, consumers and burden economic growth.
Goldstone is also co-editor of WayTooHigh.com – The Credit Card Interchange Report which provides international daily news and community updates on interchange issues.
[Source: WayTooHigh.com]
Saturday, January 06, 2007
Thursday, January 04, 2007
New House Committees (WayTooHigh.com)
Welcome to the incoming House Financial Services Committee Chairman Barney Frank, D-Mass.
[Source: WayTooHigh.com]
[Source: WayTooHigh.com]
Wednesday, January 03, 2007
Preparing for CES (WayTooHigh.com)
Next week we embark on what has become the largest trade show in the U.S.
30 Minute Photos Etc. is scheduled to address the International Consumer Electronics Show on Tuesday at 10:00 a.m. at the Venetian Hotel. Click here for more info.
[Source: WayTooHigh.com]
30 Minute Photos Etc. is scheduled to address the International Consumer Electronics Show on Tuesday at 10:00 a.m. at the Venetian Hotel. Click here for more info.
[Source: WayTooHigh.com]
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