Monday, August 27, 2007

Interesting Question: Why Only Cap Interchange Fees At The Pumps? (WayTooHigh.com)

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.

[commentary: WayTooHigh.com]