Friday, August 31, 2007 Comments on MasterCard (click here to view)

Thursday, August 30, 2007

"Americans for Consumer Education and Competition At It Again" (

Americans for Consumer Education and Competition describes itself as "a consumer education group that has the financial support of Visa USA[®]." That said, the credibility factor of their recent statement raises more questions. ACEC's PRNewsire release attacks the world-class Target Corporation, but fails to mention that this advocacy group is partly the voice of Visa, even though they are now seeking contributions, which signals their recognition that they need to be an independent voice, separate from the member bank's Visa USA. If Target Corp. wasn't forced to accept Visa cards, this attack, as reported by Milwaukee's NBC-TV affiliate TMJ-4, should have caused the giant retail chain to consider dropping Visa, but the card association's market power and unbridled controls force Target to maintain its dependence on the leading card association.

We have several previous posts over the past more than two-years regarding ACEC.


Some Encouraging Seat Changes at Visa Inc.® (commentary:, via AP news item)

Although it will be a small milage change in commuting to his new job, also in San Francisco, according to AP, Byron Pollitt, Gap Inc.'s chief financial officer is transitioning to a new job as Visa Inc's® CFO.

This is big new and something that boasts encouragement that the world's largest credit card association is preparing to shift its strategy and better embrace and work with its merchant customers. Pollitt, as with all retailing and other executives should best understand the unfair merchant interchange fees and how the fees should be cost-based while enbracing comptition.

In his new role as CFO at Visa Inc., which is a defendant in our interchange litigation, Pollitt's financial knowledge from our prospective as a retailer will be helpful in forcing Visa to shift direction. Hopefully, he will also help us demand that their antitrust price-fixing acquisitions be addressed and quickly resolved.


Recent News on (30 Minute Photos Etc.) in partnership with the US Postal Service.

"Motorists Furious Over $4.50 Gas Near Orlando International Airport" (

We came across this news item about price gouging at the gas pumps at one service station in Orlando, Florida. The comments by its station owner speak volumes about how Visa and MasterCard have successfully turned their electronic payment operation into a giant pinball game, where there are so many varied prices for the same thing. The difference, in this case is that motorists can easily put their car in drive and choose another gas station, but merchants like us are forced to accept whatever prices the card associations and its member banks dream up.


Monday, August 27, 2007

"High Credit Card Fees on Small Payments Loom Large for Kiosk Deployers" (

Interesting Question: Why Only Cap Interchange Fees At The Pumps? (

We received a call today from a news reporter from a national publication and was explaining the previously discussed $50.00 interchange fee cap at the pumps that MasterCard® had proposed some time ago. The reporter asked us why the level of $50.00 was limited just to service stations and not to all merchants? Good question, especially because by advocating the fee limit, the card association is, in our opinion, effectively explaining that even with credit card transactions, there is no reason to extend the interchange fee beyond that rate.

According to a P-I News Service article, this time last year, MasterCard's logic about limiting interchange fees at service stations must be applied to all merchants. Whether it is Tiffany & Co, Cartier, or the local corner grocery store, the interchange fee should be limited to $50.00; we suggest it should be cost-based, and therefore closer to zero - just as it is in Canada when consumers use their PIN-based debit cards.

The article explained that "MasterCard Worldwide said ... that it will establish a cap on the fees gas stations pay to clear consumer credit cards ... 'We have heard the merchant concerns loud and clear,' Joshua Peirez, group executive of MasterCard's global public policy, said in the statement. [On the retail gas cap], Peirez said it would apply to consumer credit and debit cards and will provide benefits to gasoline retailers on credit card transactions of about $50.00 or more ... MasterCard added that the 'unique structure' of the petroleum distribution business means that gasoline retailers have been 'disproportionately affected' by rapidly rising oil prices."

Click here to read the entire unedited article.

Another profile on this issue was covered by Digital Transactions: "MasterCard Will Post Interchange Rates, Cap Fees for Gas Retailers."

Notice that only MasterCard had come up with the $50.00 cap at the pumps, and we are unsure why Visa® has been silent on this matter? Perhaps because merchants will do the math and demand that all transactions for Visa too - from watches to a bag of groceries - should also have the same $50.00 limitation - until we win the antitrust, price-fixing battle.


Friday, August 24, 2007

"End of Card Charge Plan Good News" (Retail News)

Thursday, August 23, 2007

"Wells Fargo Recoups Following Massive Online, ATM Glitch" (ETC News Network) hopes they don't use this as an excuse to raise interchange fees to fund the infrastructure to fix this problem.

"Wachovia Eliminates 'Foreign' ATM Fees" (SF Business Times)

"Gas Station Owners Allege Price-Fixing" (via AP)

Gas station owners allege price fixing by Shell, Chevron

"Two Major Airlines Admit to Price Fixing" (via AP)

An Extraodinarily Fictional Read: MasterCard® Explains the Value of Interchange Fees (Commentary:

According to a posting on the MasterCard® Newsroom pages, the second largest credit card association writes (what we assert is) extraordinary fiction.

Click here to read it in their own words.

This is MasterCard's attempt to justify the annual $40 billion fee that merchants and consumers are forced to pay; many are unaware of this hidden tax.

While MasterCard explains that "a number of merchants and merchant trade groups have filed several lawsuits alleging that the U.S. interchange fees that MasterCard establishes violate antitrust laws, and that the cost of interchange is too high," the litigation is a class-action which represents all merchants - not just a few.

The litigation was brought on behalf of us (30 Minute Photos Etc.), as lead plaintiff, and other businesses and trade associations across the country, not by lawyers. Rather than address the damages, the card association's published points accuses lawyers for seeking these cases to enrich themselves, rather than discussing the billions-of-dollars that benefit the member banks.

In the case of (a division of 30 Minute Photos Etc.) we agree with MasterCard that "every business establishes a price for the goods and services it provides." in our case, we created an entirely new business model around digitally preserving generations of analog pictures; we designed a technology and operation that also provides ultra low fees. We are not a cartel that artificially fixes prices, in fact, we regularly share our story with the entire photo imaging industry and regularly speak at trade shows like the Photo Marketing Association and even at last January's (CES) Consumer Electronics Show convention - our rates and how it case about are a secret to nobody.

In our opinion, the biggest misuse of words is MasterCard's explanation that the interchange fee benefits to merchants is that it is a "small fee." Forty-billion dollars each year is anything but a small fee. MasterCard does not fully address the history of these fees and fails to explain that it was created to be cost-based - to cover the manual credit card imprint costs and weighty processing charges incurred when merchants had to mail the paper receipts to have it processed. Today, it is mostly electronic, lightening-fast; and even faster than our super-speedy photo scanning business.

They even use the word "incredible" ["Accepting payment cards provides merchants with an incredible value at a fair price.]" They are right, it is incredible, as in so implausible as to elicit disbelief.

The reality is that with a nearly 80% market dominance, MasterCard and Visa® (which until recently were both owned and controlled [Visa is preparing to launch an IPO] by its member banks) are a monopoly. They control the market. Merchants, like us, are unable to choose not to accept their debit and credit cards - we would be out of business - especially companies like us with a dominant ecommerce revenue stream.

As for interchange fees, it certainly does "help foster... security" but not so much for consumers, as explained by MasterCard, but for the member banks, which look forward to this extraordinarily large cash-cow and unbridled revenue stream; it's a tax few know about, but generates non-stop riches for MasterCard, Visa and its member banks. If they were so concerned about fraud costs, they would cease the issuance of billions of direct mail solicitations and providing credit cards to risky consumers. Today's technology is also helping to lower other types of fraud costs, yet interchange fee adjustments do not reflect the cost savings either.

The fees do encourage "banks to innovate and develop new payment options," but in some cases, to the detriment of cardholders and merchants. Look at the one-hundred plus separate merchant interchange fees which create new revenue streams every time a new innovative scheme is hatched to plunder more money from retailers and cardholders.

When reading the MasterCard explanations, they even discuss how the payment industry is "competitive." As we see it, the only contest they host is one-way, and the competition is to seek out new ways to increase interchange fees. With an 80% market share, competition is a fleeting dream. Why are rates about 1.7% for an average transaction in the U.S., but only .7% in the U.K, .55% in Australia, and 0.0% for PIN-based cards in Canada?

And, according to MasterCard, they do "recognize that merchants do want lower costs for all aspects of their business." It is encouraging that they recognize this fact, but if they strive to help lower interchange costs, why then are fees regularly rising?

Words and actions are very different when it comes to interchange issues and our Credit Card Interchange Report boasts 720 postings since February, 2005. provides our prospective as a long-time retail and ecommerce business.


Wednesday, August 22, 2007

Will Merchant Interchange Fee Cash Cow Be Used To Bail Out The Banks? [ commentary]

UPDATE: According to the WSJ, Bank of America Corp. is providing an equity investment to buy $2 billion of Countrywide Financial Corp.

The top four banks (which are also represented as defendants in our antitrust price-fixing merchant interchange litigation) announced today they are borrowing $2 billion directly from the Fed, which can be seen as a sign of liquidity problems.

We cannot help but wonder whether the banks will wield their unbridled power to tap their $40 billion annual merchant interchange fee windfall treasure to help reduce their growing credit crisis. With the deepening mortgage meltdown, will the banks again storm their interchange cash cow vault?

The credit card companies have been regularly hiking their interchange fees. But, with many financial institutions facing a credit shortage and onerous liquidity shortfalls, interchange fees might be one way to bail themselves out at the expense of their retail and cardholder customers. We certainly will not tolerate such a move and are closely monitoring our mail to see whether interchange fees are poised to again rise.


Monday, August 20, 2007

Are Vegas Hotels Trying to Replicate Visa® and MasterCard's® Unbridled Interchange Fee Model? (

One of the more brazen moves in Ticket Master-like "convenience fee" excesses, is what is happening at several Las Vegas and other hotel properties. It seems that they are trying to replicate the excesses of Visa® and MasterCard's® interchange fee windfalls.

Within the last few month, we have noticed that there is a new charge appearing on hotel bills. It is called a resort fee. During one recent stay at The Hotel, there was no "resort fee," but just this week, it was added to a friend's bill.

During a stay at another property two weeks ago, the Green Valley Ranch tried tacking on their resort fee to the bill. They explained it was to cover the coffee in the room and other amenities; I thought that was what the hotel room charge was for? They acquiesced and we split the difference.

Click here to learn about Hilton's involvement and how it handled their resort fees.

The new resort fees are excessive profiteering and an unfair tax on guests who are going to grow more weary because these fees are about $30 extra per day. These resort or facilities fees are in addition to a regular room rate; much like the merchant interchange fees are really nothing more than a "convenience" or "facility fee."

Both are extra taxes because the companies can get away with it.

In the case of the two leading credit card associations, we guess the actual cost to transact one electronic card payment is pennies, yet they are forcing merchants and consumers to pay upwards of 2, 3, 4 and even 5% of their total purchase in excessive and unbridled greed payments.

In the case of hotels, the resort fee covers items that guests may never use, or that was once included. Years ago, when retailers like us were still using manual credit card imprinters and thick, multi-page carbon-copy card receipts that had to be processed and mailed away to clear, there were real interchange costs; today, it's any one's guess how insignificant the actual costs of processing payments are. Excuses for these fees range from covering fraud costs to paying for cardholders free airline mileages.

Just as the hotels are trying to pass along the cost of using the guy, Visa and MasterCard are successfully forcing retailers to pay more than one-hundred separate rates, including extra charges when cardholders present an affinity or frequent flyer card.

The difference between the new resort fees and the $40 billion interchange tax is that the latter is not negotiable and you can choose not to stay at a certain hotel.

Interchange fees are set by the banks in what we assert are forced on merchants through anti competitive and illegal price fixing schemes. At a Las Vegas hotel you can insist that their newest revenue center be removed from your bill, but retailers and consumers are still forced to pay whatever the banks dream up. We cannot choose another electronic payment service as Visa and MasterCard own an 80% market power over the entire industry.


Sunday, August 19, 2007

"VISA Is Mocking You, George Washington" (Opinion:

"Rewarding? Banks Like Signature Cards, But Others Cite 'Hidden Costs' (via The Winston-Salem Journal)

[The below article is one of the best profiles we have recently encountered on the disconnect over hidden merchant interchange fees]

By Richard Craver

Financial institutions and merchants are engaged in a marketing tug-of-war over check-card transactions, with consumers’ signatures the focus of the fight.

At least six banks and one credit union serving the Triad are offering rewards, such as airline and hotel discounts, brand-name merchandise and gift cards, to encourage consumers to select credit for check-card purchases.

Signing for a check-card purchase, instead of using a personal identification number, or PIN, converts it into a credit transaction. However, the money still comes out of a checking account.

“The idea of earning rewards points, on everyday purchases that members are already making, seemed appealing to our members,” said Rick Jennings, a senior manager of support services for Allegacy Federal Credit Union. The other financial institutions are Bank of America Corp., BB&T Corp., First Citizens Bank, RBC Centura, SunTrust Banks Inc. and Wachovia Corp.

“Just as you have seen the availability of credit-card rewards programs increase, a similar trend appears to be developing with check cards and debit cards, particularly as the cards continue to grow in popularity as a payment method and institutions respond to competition,” said Nathan Batts, an associate counsel for the N.C. Bankers Association.

However, several retail trade groups are discouraging consumers from signing for check-card purchases. Although the groups said that those transactions are being marketed as a no-cost frill for consumers, they stress they carry “hidden costs” that lead to higher prices at retail and the gas pump.

A battle over fees

The retail groups, including the Food Marketing Institute, National Retail Federation and National Association of Convenience Stores, have created Web sites, such as, to counter the financial institutions’ marketing.

“We believe this marketing come-on is driving up the cost at retail for most consumers while rewarding a limited number of consumers,” said Craig Shearman, a public-relations official for the National Retail Federation.

Why all the fuss?

Merchants pay interchange fees to Visa and MasterCard for the handling of credit transactions, whether credit card or a signature check card. Another, less-expensive collection method is typically used for debit-card transactions that require a PIN number. The bulk of interchange fees associated with credit transactions go to financial institutions, according to analysts.

Nationally, 36 percent of banks now offer check-card reward programs, according to a report by the American Bankers Association. Most programs require a signature transaction, but Bank of America offers reward points on a sliding scale for signature and debit check-card transactions.

“All Bank of America check-card rewards programs allow the customer to choose the type of purchase that is most convenient for them,” said Diane Wagner, a spokeswoman for the bank.

On average, there is a 2 percent interchange-fee charge for credit-card transactions, between 1 percent and 1.25 percent for signature check cards, and between 0.3 percent and 1 percent for debit check cards. The higher the transaction amount, the higher the interchange fee.

For example for a $60 purchase, the average interchange fee is $1.20 as a credit-card transaction, 60 cents to 85 cents as a signature check card, and 20 cents to 60 cents as debit.

“Choosing the credit key earns interchange income from Visa USA for Allegacy, which is given back to you in the form of higher savings rates, low or no fees and lower loan rates,” according to Allegacy’s marketing pitch for its check-card rewards program.

The difference in fees works out to be substantial, considering that there have been at least three times more signature check-card transactions as debit in recent years, according to a report from the Chicago Federal Reserve Board. There also are four times as many merchants that accept signature check-card transactions (6 million) as PIN transactions (1.5 million), according to financial institutions and retail trade groups.

According to the Merchants Payment Coalition, credit-card companies and financial institutions collected more than $36 billion in interchange fees in 2006 - up 117 percent from 2001.

“Unlike other credit-card fees that show up on your monthly statement, the credit-card interchange fee is hidden,” the coalition said. “Credit-card company rules make it practically impossible for merchants to tell customers how much they are really paying.”

The check-card rewards include “memorable” experiences, such as being an honorary crew member for a day for a NASCAR team (Bank of America), a lunch train ride for two through Napa Valley wine country (Wachovia) or zero-gravity airplane flight (SunTrust). First Citizens is holding a weekly reward-points sweepstakes through Sept. 29 for customers who sign for their check-card purchases.

A signature check-card transaction has value beyond reward points, the financial institutions said, such as increased identity-theft protection and better merchant identification than a debit transaction.

The check-card reward programs are not really a sign of how competitive the market is becoming for deposits, said Tony Plath, a finance professor at UNC Charlotte.

“It’s more a sign of the growing importance of fee income to the banking industry in a market where the (interest) yield curve has been darn near flat for most of the last two years,” Plath said.

The programs differ considerably in the amount of money required to earn rewards points.

Some Bank of America, BB&T and Wachovia check-card products offer a point for every dollar spent, while Allegacy’s ratio is a point for every $2 spent, SunTrust’s is a point for every $4 spent, and RBC Centura’s is a point for every $5 spent. Allegacy is running a promotion offering double reward points.

The merchant groups also criticize the amount of points required to earn a sizable reward.

For example, it takes 85,000 points to earn Wachovia’s lunch train ride for two through the Napa Valley wine country or 473,700 points for the zero-gravity airplane flight offered by SunTrust. But some $10 restaurant and retail gift cards require just 1,500 points for redemption, and SunTrust offers a cash credit to checking accounts with as few at 3,500 points.

There’s clearly a trend where checks and cash are being replaced, said Scott Qualls, the manager of BB&T’s deposit-access products. “As those are replaced, that reduces the merchant fees for cash and reduced their losses from checks, and drives down their overall cost of payment,” he said.

But Mallory Duncan, the general counsel for the National Retail Federation, said that signature check-card transactions are part of financial institutions’ strategy for “getting more consumers into the habit of choosing credit with their check-card purchases and signing for all purchases.”
“As more consumers sign for check-card transactions, it becomes easier for the credit-card companies to raise their interchange fees,” Duncan said.

About 4.2 cents of every gallon of gas sold nationally in 2006 went toward paying for credit-card transaction fees, said Jeff Lenard, a spokesman for the National Association of Convenience Stores.

“Every consumer pays this amount regardless of how they pay for their gas,” Lenard said. “Essentially, cash customers are subsidizing check-card reward programs through higher pump prices.”

The average grocer makes a profit of about 1 percent on sales, Steven Smith, the chairman of the Food Marketing Institute, said during a July 19 appearance before a U.S. House judiciary committee.

With credit-card interchange fees being 2 percent or more of a sale, “the effect is that fees set collectively by the credit-card companies are now double the industry’s profit margins,” Smith said.

“Basically, it comes down to a decision to either swallow hard and pay high fees that are set with no competitive influences, or turn your back on the 65 percent of your revenue from customers who have been influenced by the card industry’s advertising to believe they are social outcasts if they pay with actual cash,” Smith said.

U.S. Rep. Mel Watt, D-12th, said he expects that there will more hearings on interchange fees to “get a better feel of how the interchange fee system works and who is paying for it.”

Interchange fees have drawn the attention of Consumer Reports, said Matt Fields, the communications counsel for the magazine. “I think it’s fair to say that it will be a large part of Consumer Reports’ study on the ‘dark secrets of debit cards’ due later in August,” Fields said.

Most local community banks said they are considering offering similar programs.

“While some institutions tie in to just a check card and/or credit card, our product will reward them for all accounts they have with us and usage within all accounts,” said Daniel Duggan, a vice president of marketing for Yadkin Valley Financial Corp.

Duggan said that Yadkin Valley is aware of the tension caused by the interchange fees. “We hope customers will use it as a debit when and where they can to help minimize the fee exposure to the business,” Duggan said.


Signature vs. PIN transactions

• One-third of financial institutions offer check-card reward programs, primarily large banks.

• Thirteen percent of consumers are enrolled in a check-card rewards program, up from 8 percent in 2003.

• Of financial institutions with check-card rewards, 71 percent offer the rewards for signature transactions only.

• Fifteen percent of check-card holders have accounts subject to a fee for each PIN transaction, while just 1 percent have accounts subject to a fee for each signature transaction.

• Forty-six percent of check-card holders plan to use signature transactions more often because of a reward program; 16 percent plan to use PIN transactions more often because of a reward program.

Source: Federal Reserve Board of Chicago; American Bankers Association

[Source: Winston-Salem Journal]

Wednesday, August 15, 2007

News Profile on (

Thursday's New York Times has a feature profile on our business model and mentions for our super-fast photo scanning. See link to view. Rhetorical question is why are entrepreneurs able to use technology to cut their prices, while seemingly the credit card issuers continue to increase their fees?

[Source,, via The NYT]

"MasterCard Execs Plan to Sell Shares" (via AP)

Thursday, August 09, 2007

Global Merchant Interchange Rates (

[Click on below map to view]

Write a check and the interchange charge is zero. Use a PIN-based debit card in Canada and the interchange charge is zero. But, use a credit card in the U.S. and the fees are among the highest in the world. Why?


Friday, August 03, 2007

Wednesday, August 01, 2007

"Pilot: No More Visa, Mastercard at the Pumps" (Land Line)