Presidential candidate and Senate Banking Committee Chairman Christopher Dodd, D-Conn, recently addressed interchange fees during a Senate hearing. Click here for complete transcript.
"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. With that, I would like to introduce the witnesses before the Committee."
[Source: UnfairCreditCardFees.com link]
Saturday, September 08, 2007
Friday, September 07, 2007
Presidential Candidates' Position on Credit Card Fees
We will begin posting comments and views as the presidential candidates begin to address credit card fees.
As the first entry, we came across this blog posting from myDD.com about former Senator John Edwards' support of lowering credit card fees. The blogger posted the below comments to address additional concerns that would help the candidate "win over small business owners:"
See this link for complete comments by the Blogger.
Assure that all credit card fees are cost-based.
In short, any fee charged by a credit card company must a) be justified, and b) reflect the cost of whatever service is being performed that the fee is being charged for. This is an issue for the Consumers Union's credit card agenda and for merchants especially. And it's merchant fees where Edwards could find new headway.
If you haven't followed my diaries on the subject of the interchange fee, see my first one here: "The Biggest Reverse Robin Hood Scheme You've Never heard Of." If you've never heard of it, that's not your fault -- the banks which control the credit card associations prefer it that way. So while proposal #5 is just a good idea in any case, it might carry specific political benefits if he put some emphasis on that fee in particular. In practice, this would likely remove the interchange fee from the reward card equation. Rewards on Gold and Platinum cards come from the fees incurred by these transactions. That's also where the banks' never-been-higher profits derive. But if it costs $.50 to send the payment through, don't worry -- they'll take a lot more.
I'm not sure where now but I read recently that only 13% of interchange fees actually goes towards paying the processing transactions -- the rest goes to fund rewards as mentioned above as well as advertising and junk mail. Transactions should be no more expensive than they need to be. The fee as it was originally created was a necessary measure to cover costs. No one here is saying there shouldn't be any interchange fee (although some foreign governments are considering just that).
And though the fee is charged to businesses large and small that have merchant credit card accounts, it is a consumer issue, too because it drives down your purchasing power. It is an artificial form of inflation, where the premium above regular prices goes into the pockets of bank shareholders and toward their next free airline ride. Interchange fees are reflected in the price of nearly everything you buy. As much as $2 of every $100 you spend goes to card issuers -- no wonder interchange has risen a staggering 117% since 2001. Moreover, bringing this fee back to what it was all about in the first place would give smaller merchants more pricing flexibility -- another way to compete for your business, and maybe save you a bit of money. The current system costs the average American family more than $300 a year in interchange fees.
This might also be a good way to reinforce his opposition to the bankruptcy bill, and keep up the fight for working Americans. He has been a good advocate against the 2005 bankruptcy bill, but not everyone has forgotten his voting for a bad one in 2000 that Bill Clinton had to veto. I noticed the Dodd campaign is pushing a quote from Paul Wellstone in 2001, who said the bill "punishes the vulnerable and it rewards the big banks and credit card companies for their poor practices ... We are heading into hard economic times and we're going to make it hard for people to rebuild their lives."
Small business owners might be where Edwards can make up the most support over the next few months I think we can all agree we need bankruptcy reform, and credit card reform. And I know when it comes to merchants, I know how the rising interchange fee is hurting them. If Edwards wants to make some inroads with a group that might be skeptical of him, I can think of no better way than by bringing them into his fight against the credit card industry.
[Source, via MyBB.com - link: http://www.mydd.com/story/2007/9/7/144828/2751
As the first entry, we came across this blog posting from myDD.com about former Senator John Edwards' support of lowering credit card fees. The blogger posted the below comments to address additional concerns that would help the candidate "win over small business owners:"
See this link for complete comments by the Blogger.
Assure that all credit card fees are cost-based.
In short, any fee charged by a credit card company must a) be justified, and b) reflect the cost of whatever service is being performed that the fee is being charged for. This is an issue for the Consumers Union's credit card agenda and for merchants especially. And it's merchant fees where Edwards could find new headway.
If you haven't followed my diaries on the subject of the interchange fee, see my first one here: "The Biggest Reverse Robin Hood Scheme You've Never heard Of." If you've never heard of it, that's not your fault -- the banks which control the credit card associations prefer it that way. So while proposal #5 is just a good idea in any case, it might carry specific political benefits if he put some emphasis on that fee in particular. In practice, this would likely remove the interchange fee from the reward card equation. Rewards on Gold and Platinum cards come from the fees incurred by these transactions. That's also where the banks' never-been-higher profits derive. But if it costs $.50 to send the payment through, don't worry -- they'll take a lot more.
I'm not sure where now but I read recently that only 13% of interchange fees actually goes towards paying the processing transactions -- the rest goes to fund rewards as mentioned above as well as advertising and junk mail. Transactions should be no more expensive than they need to be. The fee as it was originally created was a necessary measure to cover costs. No one here is saying there shouldn't be any interchange fee (although some foreign governments are considering just that).
And though the fee is charged to businesses large and small that have merchant credit card accounts, it is a consumer issue, too because it drives down your purchasing power. It is an artificial form of inflation, where the premium above regular prices goes into the pockets of bank shareholders and toward their next free airline ride. Interchange fees are reflected in the price of nearly everything you buy. As much as $2 of every $100 you spend goes to card issuers -- no wonder interchange has risen a staggering 117% since 2001. Moreover, bringing this fee back to what it was all about in the first place would give smaller merchants more pricing flexibility -- another way to compete for your business, and maybe save you a bit of money. The current system costs the average American family more than $300 a year in interchange fees.
This might also be a good way to reinforce his opposition to the bankruptcy bill, and keep up the fight for working Americans. He has been a good advocate against the 2005 bankruptcy bill, but not everyone has forgotten his voting for a bad one in 2000 that Bill Clinton had to veto. I noticed the Dodd campaign is pushing a quote from Paul Wellstone in 2001, who said the bill "punishes the vulnerable and it rewards the big banks and credit card companies for their poor practices ... We are heading into hard economic times and we're going to make it hard for people to rebuild their lives."
Small business owners might be where Edwards can make up the most support over the next few months I think we can all agree we need bankruptcy reform, and credit card reform. And I know when it comes to merchants, I know how the rising interchange fee is hurting them. If Edwards wants to make some inroads with a group that might be skeptical of him, I can think of no better way than by bringing them into his fight against the credit card industry.
[Source, via MyBB.com - link: http://www.mydd.com/story/2007/9/7/144828/2751
"The Economic Law of GREED" (Commentary: WayTooHigh.com)
With gas prices again surging to record highs - a barrel today is costing more than $77.00 - it seems that even ExxonMobil, Shell and others are somehow able to lower the cost at the pumps.
But, look at the huge merchant interchange fee windfalls and exaggerated profiteering as motorists, truckers and others fill-up at the pumps and are forced to use plastic to charge. While the interchange fees maintain their steep rates, gas prices have actually declined. So, how is it that with gas prices at record highs, the price at the pump (in So. Calif) is about $2.75 for regular?
When a barrel was hovering at about $70.00, the pump price was about $3.25 and more. The Question is: what is artificially keeping gas prices down, and why aren't the credit card associations and member banks also helping to lower their fees too? The Answer, in our opinion: A classic case of illegal price-fixing.
What happened to MasterCard's® plan to cap interchange fees at the pumps to $50.00, and why has Visa® been silent on this issue, and if they agree to putting an interchange fee cap at the pumps, why not on all transactions too?
Interesting Question: Why Only Cap Interchange Fees At The Pumps? (WayTooHigh.com)
[Commentary: WayTooHigh.com]
But, look at the huge merchant interchange fee windfalls and exaggerated profiteering as motorists, truckers and others fill-up at the pumps and are forced to use plastic to charge. While the interchange fees maintain their steep rates, gas prices have actually declined. So, how is it that with gas prices at record highs, the price at the pump (in So. Calif) is about $2.75 for regular?
When a barrel was hovering at about $70.00, the pump price was about $3.25 and more. The Question is: what is artificially keeping gas prices down, and why aren't the credit card associations and member banks also helping to lower their fees too? The Answer, in our opinion: A classic case of illegal price-fixing.
What happened to MasterCard's® plan to cap interchange fees at the pumps to $50.00, and why has Visa® been silent on this issue, and if they agree to putting an interchange fee cap at the pumps, why not on all transactions too?
Interesting Question: Why Only Cap Interchange Fees At The Pumps? (WayTooHigh.com)
[Commentary: WayTooHigh.com]
Thursday, September 06, 2007
Will Interchange Fees Increase to Bail Out the Banks? (Commentary:WayTooHigh.com)
Part II
With the growing turmoil in the financial markets, due to unchecked risky loan schemes, we worry that the banks might use their market power to raise interchange fees. Is this possible? Because of the 80% monopolistic anti-competitive grasp that the credit card associations' member banks wield, we would not be surprised.
Angered, yes.
Surprised, no.
Just today, it was reported that Countrywide's stock price plunged below the $18 price that Bank of America may plan to use as the bench mark for its announced $2 billion investment in the largest mortgage lender in the U.S. With all the attention to the damage caused by loans to people earning $40,000 a year, but "qualifying" for $800,000 homes, the banks will be forced to do something. They will refill their swimming pools of cash if the Visa® IPO moves forward, but even that is questionable, especially as they prepare to identify the risk factors to their planned IPO in early 2008.
According to Reuters, the Mortgage Bankers Association announced that "the rate of home loans in foreclosure rose to a record high in the second quarter of 2007 as more homeowners in California, Florida and other states could not refinance their adjustable-rate mortgages."
PART I
Will Merchant Interchange Fee Cash Cow Be Used To Bail Out The Banks? [WayTooHigh.com commentary] [Commentary: WayTooHigh.com]
Saturday, September 01, 2007
Why Is The Interchange Fee Scheme Inflationary? (Commentary, WayTooHigh.com)
Even gas prices are declining.
The Federal Reserve and the Executive Office are stepping in to help lower interest rates to protect risky real estate investments, where people effectively rented their homes and gained huge tax incentives to borrow against phony valuations.
Seemingly most fees and rates are being lowered, except the bank controlled $40 billion dollar annual fiefdom they created which is now used to extract a hidden tax from merchants and consumers. If only they agreed to our recommendation to post the exact interchange fee on every debit and credit card receipt to transparently present how their scheme works.
We regularly point out that technology and efficiencies are helping to lower rates for products and services, but as far as MasterCard®, Visa® and its member banks, they seem to have missed that lesson on Moore's Law. Even our photo scanning business is garnering nationwide attention for helping to lower the cost to preserve generations of analog pictures.
[Commentary: WayTooHigh.com]
The Federal Reserve and the Executive Office are stepping in to help lower interest rates to protect risky real estate investments, where people effectively rented their homes and gained huge tax incentives to borrow against phony valuations.
Seemingly most fees and rates are being lowered, except the bank controlled $40 billion dollar annual fiefdom they created which is now used to extract a hidden tax from merchants and consumers. If only they agreed to our recommendation to post the exact interchange fee on every debit and credit card receipt to transparently present how their scheme works.
We regularly point out that technology and efficiencies are helping to lower rates for products and services, but as far as MasterCard®, Visa® and its member banks, they seem to have missed that lesson on Moore's Law. Even our photo scanning business is garnering nationwide attention for helping to lower the cost to preserve generations of analog pictures.
[Commentary: WayTooHigh.com]
Friday, August 31, 2007
Thursday, August 30, 2007
"Americans for Consumer Education and Competition At It Again" (WayTooHigh.com)
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.
[Commentary: WayTooHigh.com]
We have several previous posts over the past more than two-years regarding ACEC.
[Commentary: WayTooHigh.com]
Some Encouraging Seat Changes at Visa Inc.® (commentary: WayTooHigh.com, 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.
[Commentary, WayTooHigh.com]
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.
[Commentary, WayTooHigh.com]
Recent News on ScanMyPhotos.com (30 Minute Photos Etc.)
ScanMyPhotos.com in partnership with the US Postal Service.
"Motorists Furious Over $4.50 Gas Near Orlando International Airport" (Local6.com)
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.
[commentary: WayTooHigh.com]
[commentary: WayTooHigh.com]
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]
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]
Friday, August 24, 2007
Thursday, August 23, 2007
"Wells Fargo Recoups Following Massive Online, ATM Glitch" (ETC News Network)
WayTooHigh.com hopes they don't use this as an excuse to raise interchange fees to fund the infrastructure to fix this problem.
"Gas Station Owners Allege Price-Fixing" (via AP)
Gas station owners allege price fixing by Shell, Chevron
An Extraodinarily Fictional Read: MasterCard® Explains the Value of Interchange Fees (Commentary: WayTooHigh.com)
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 ScanMyPhotos.com (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 WayTooHigh.com Credit Card Interchange Report boasts 720 postings since February, 2005. WQayTooHigh.com provides our prospective as a long-time retail and ecommerce business.
[commentary: WayTooHigh.com]
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 ScanMyPhotos.com (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 WayTooHigh.com Credit Card Interchange Report boasts 720 postings since February, 2005. WQayTooHigh.com provides our prospective as a long-time retail and ecommerce business.
[commentary: WayTooHigh.com]
Wednesday, August 22, 2007
Will Merchant Interchange Fee Cash Cow Be Used To Bail Out The Banks? [WayTooHigh.com 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.
[Source: WayTooHigh.com]
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.
[Source: WayTooHigh.com]
Monday, August 20, 2007
Are Vegas Hotels Trying to Replicate Visa® and MasterCard's® Unbridled Interchange Fee Model? (WayTooHigh.com)
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.
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.
[Commentary: WayTooHigh.com]
Sunday, August 19, 2007
"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
JOURNAL REPORTER
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 www.unfaircreditcardfees.com, 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]
By Richard Craver
JOURNAL REPORTER
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 www.unfaircreditcardfees.com, 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 ScanMyPhotos.com (WayTooHigh.com)
Thursday's New York Times has a feature profile on our business model and mentions ScanMyPhotos.com 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, WayTooHigh.com, via The NYT]
[Source, WayTooHigh.com, via The NYT]
Thursday, August 09, 2007
Global Merchant Interchange Rates (WayTooHigh.com)
[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?
[Source: WayTooHigh.com]
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?[Source: WayTooHigh.com]
Friday, August 03, 2007
Wednesday, August 01, 2007
Tuesday, July 24, 2007
"National Restaurant Association Applauds House Panel for Review of Unfair Credit Card Interchange Fees" (NRA release)
(Washington, DC) – The National Restaurant Association today applauded the House Judiciary Committee Antitrust Task Force for holding a hearing to review the interchange fee pricing practices of credit card companies.
"Today's hearing presents an important opportunity for further investigation into an issue that poses an enormous burden to small businesses, including restaurants, across the country," said Mike Shutley, Director of Legislative Affairs for the National Restaurant Association. "We are pleased that Congress is shedding light on this unfair credit card process, and are confident it will lead to making the system more competitive and transparent so that it better serves consumers and merchants alike."
The credit card interchange fee is a percentage of each transaction that Visa and MasterCard member banks collect from retailers every time a credit or debit card is used to pay for a purchase. The fee varies with type of card, size of merchant, and other factors, but averages close to two percent, or about $2 for a $100 purchase. Visa and MasterCard banks collected more than $36 billion in interchange fees last year, up 17 percent from 2005 and 117 percent since 2001.
According to a recent study, the credit card companies and their banks spend only about 13 percent of the interchange fee on actual. The rest goes for marketing, profit and other things like rewards programs.
Unlike other credit card fees that show up on monthly statements, the credit card interchange fee is hidden, and Visa/MasterCard rules make it practically impossible for merchants to tell customers how much they are really paying. Instead, merchants are effectively left to include the fee in the price of merchandise.
The National Restaurant Association is a member of the Merchants Payment Coalition (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 2.7 million stores with approximately 50 million employees. www.unfaircreditcardfees.com
[source: NRA News Release, Restaurant.org]
"Today's hearing presents an important opportunity for further investigation into an issue that poses an enormous burden to small businesses, including restaurants, across the country," said Mike Shutley, Director of Legislative Affairs for the National Restaurant Association. "We are pleased that Congress is shedding light on this unfair credit card process, and are confident it will lead to making the system more competitive and transparent so that it better serves consumers and merchants alike."
The credit card interchange fee is a percentage of each transaction that Visa and MasterCard member banks collect from retailers every time a credit or debit card is used to pay for a purchase. The fee varies with type of card, size of merchant, and other factors, but averages close to two percent, or about $2 for a $100 purchase. Visa and MasterCard banks collected more than $36 billion in interchange fees last year, up 17 percent from 2005 and 117 percent since 2001.
According to a recent study, the credit card companies and their banks spend only about 13 percent of the interchange fee on actual. The rest goes for marketing, profit and other things like rewards programs.
Unlike other credit card fees that show up on monthly statements, the credit card interchange fee is hidden, and Visa/MasterCard rules make it practically impossible for merchants to tell customers how much they are really paying. Instead, merchants are effectively left to include the fee in the price of merchandise.
The National Restaurant Association is a member of the Merchants Payment Coalition (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 2.7 million stores with approximately 50 million employees. www.unfaircreditcardfees.com
[source: NRA News Release, Restaurant.org]
Monday, July 23, 2007
"NACS Calls the Rapid Increase in Card Fees “Unjustifiable and Unsustainable” (Supermarket & Retailer)
Noting that the convenience and petroleum retailing industry in 2006 paid more in credit card fees that it earned in overall profits, NACS President and CEO Hank Armour told the House Judiciary Committee’s Antitrust Task Force in written testimony that the “rapid increase in fees is unjustifiable and unsustainable.”
Armour was among those who submitted written testimony before the House Judiciary Committee’s Antitrust Task Force for the July 19 “Hearing on Credit Card Interchange Fees.” Scheduled to testify at the hearing on behalf of the retail community were Mallory Duncan, senior vice president and general counsel of the National Retail Federation and president of the Merchants Payments Coalition, and Steven Smith, president and CEO of K-VA-T Food Stores.
“The [convenience and petroleum retailing] industry posted $4.8 billion in profits last year – which includes profits both at the pump and inside the store – but paid $6.6 billion in credit and debit card fees on its transactions,” noted Armour. “The next time you stop for a fill-up, keep in mind that more of the money you are paying goes to the card companies than the retailer selling you gasoline will get to keep.”
Armour said that Visa, MasterCard and their member banks engage in activities that violate the anti-trust laws of the United States. “The collective setting of interchange fees represents an ongoing antitrust violation by the two leading payment card associations, Visa and MasterCard. These antitrust violations cost merchants and their customers tens of billions of dollars annually.”
The current interchange rates are not justified by costs, noted Armour. “While there may have been some reasonable basis for the size of these fees decades ago, the proliferation of card transactions has driven down per transaction costs. In fact, a bank consulting firm reported last year that the cost of processing transactions was only 13 percent of the interchange fees charged.”
In 2006, the card fees paid by the convenience and petroleum retailing industry increased 22 percent and represented the second largest operating expense in the industry, behind only labor. Overall, Visa and MasterCard have increased their revenues generated from interchange fees by 117 percent since 2001 for a total of $36 billion annually. Armour pointed out that about 60 percent of all interchange in the world is paid by American consumers.
“The United States enjoys the highest volume of credit card transactions in the world. Theoretically, this should lead to significant economies of scale and lower interchange rates. We also have the best technology for processing these transactions and we have very low, and decreasing, rates of fraud. Yet, somehow, U.S. rates are higher than corresponding rates in other countries.”
Armour argued that the reason Visa and MasterCard are able to charge such elevated rates for interchange is because they have market power, which they protect through a complex web of secret rules
[source: Supermarket & Retailer]
Armour was among those who submitted written testimony before the House Judiciary Committee’s Antitrust Task Force for the July 19 “Hearing on Credit Card Interchange Fees.” Scheduled to testify at the hearing on behalf of the retail community were Mallory Duncan, senior vice president and general counsel of the National Retail Federation and president of the Merchants Payments Coalition, and Steven Smith, president and CEO of K-VA-T Food Stores.
“The [convenience and petroleum retailing] industry posted $4.8 billion in profits last year – which includes profits both at the pump and inside the store – but paid $6.6 billion in credit and debit card fees on its transactions,” noted Armour. “The next time you stop for a fill-up, keep in mind that more of the money you are paying goes to the card companies than the retailer selling you gasoline will get to keep.”
Armour said that Visa, MasterCard and their member banks engage in activities that violate the anti-trust laws of the United States. “The collective setting of interchange fees represents an ongoing antitrust violation by the two leading payment card associations, Visa and MasterCard. These antitrust violations cost merchants and their customers tens of billions of dollars annually.”
The current interchange rates are not justified by costs, noted Armour. “While there may have been some reasonable basis for the size of these fees decades ago, the proliferation of card transactions has driven down per transaction costs. In fact, a bank consulting firm reported last year that the cost of processing transactions was only 13 percent of the interchange fees charged.”
In 2006, the card fees paid by the convenience and petroleum retailing industry increased 22 percent and represented the second largest operating expense in the industry, behind only labor. Overall, Visa and MasterCard have increased their revenues generated from interchange fees by 117 percent since 2001 for a total of $36 billion annually. Armour pointed out that about 60 percent of all interchange in the world is paid by American consumers.
“The United States enjoys the highest volume of credit card transactions in the world. Theoretically, this should lead to significant economies of scale and lower interchange rates. We also have the best technology for processing these transactions and we have very low, and decreasing, rates of fraud. Yet, somehow, U.S. rates are higher than corresponding rates in other countries.”
Armour argued that the reason Visa and MasterCard are able to charge such elevated rates for interchange is because they have market power, which they protect through a complex web of secret rules
[source: Supermarket & Retailer]
Saturday, July 21, 2007
Thursday, July 19, 2007
"U.S. Lawmaker Wants Proof Credit Card Fees Don't Harm" (Reuters)
According to the Reuter's story, Visa USA® Vice President Rosetta Jones said in a statement the interchange debate is about business decisions and not about antitrust issues. Ms. Jones is in our opinion, unequivocally wrong. As a retailer, I would be out of business is we were not forced to accept the two lead card association's products. To prove just how wrong Ms. Jones is, we eagerly away Visa's IPO filing and pages of Risk Factors, which we are eager to profile on WayTooHigh.com. If you thought that last year's MasterCard® Risk Factors were worrisome, just wait.
---------------------------------
[Repost from Friday, June 22, 2007]
"Visa Reveals Plan to Restructure for IPO" (via AP)
If you thought that the "Risk Factors" that MasterCard® described during its IPO filing was frightening, just wait for Vias's® list of reasons to get worried too. As reported today by AP, "The offering will also help insulate member banks from billions of dollars in potential legal damages from antitrust claims brought by merchants". Just as with MasterCard, Visa too can try to pawn off its legal liabilities onto others, but its prior alleged antitrust violations and legal obligations do not evaporate by selling shares to the public. Reuters is reporting that "the filing shows that Visa USA members will assume responsibility for a variety of litigation, including antitrust lawsuits in which merchants are accusing Visa and MasterCard of price-fixing.... Visa intends the IPO to fund expansion and help pay potentially heavy legal bills.
"These prior WayTooHigh.com postings help explain why, in our opinion, the transferring of ownership does nothing to dissolve their prior damages.
But, the Alleged Crimes Have Already Been Committed (WayTooHigh.com)
Visa's® Planned Restructuring Sounds Like Musical Chairs (commentary: WayTooHigh.com)
MasterCard's® Legal Bill Could Be $26 Bln (from report in CardLine)
Largest Planned IPO Since Google has No Safety Net (WayTooHigh.com)
MasterCard Inc®. IPO, "The Ultimate Hedge Against Litigation" (WayTooHigh.com)
Will "Risk Factors" Doom MasterCard's® IPO? (WayTooHigh.com)
"MasterCard's® Legal and Regulatory Risks Threaten ... Its Entire Business Model" (BW)
Banks Set to Bolt From MasterCard Inc.® on May 22 (WayTooHigh.com)
[source: WayTooHigh.com, with link to AP]
[Commentary, WayTooHigh.com, via Reuter's article]
---------------------------------
[Repost from Friday, June 22, 2007]
"Visa Reveals Plan to Restructure for IPO" (via AP)
If you thought that the "Risk Factors" that MasterCard® described during its IPO filing was frightening, just wait for Vias's® list of reasons to get worried too. As reported today by AP, "The offering will also help insulate member banks from billions of dollars in potential legal damages from antitrust claims brought by merchants". Just as with MasterCard, Visa too can try to pawn off its legal liabilities onto others, but its prior alleged antitrust violations and legal obligations do not evaporate by selling shares to the public. Reuters is reporting that "the filing shows that Visa USA members will assume responsibility for a variety of litigation, including antitrust lawsuits in which merchants are accusing Visa and MasterCard of price-fixing.... Visa intends the IPO to fund expansion and help pay potentially heavy legal bills.
"These prior WayTooHigh.com postings help explain why, in our opinion, the transferring of ownership does nothing to dissolve their prior damages.
But, the Alleged Crimes Have Already Been Committed (WayTooHigh.com)
Visa's® Planned Restructuring Sounds Like Musical Chairs (commentary: WayTooHigh.com)
MasterCard's® Legal Bill Could Be $26 Bln (from report in CardLine)
Largest Planned IPO Since Google has No Safety Net (WayTooHigh.com)
MasterCard Inc®. IPO, "The Ultimate Hedge Against Litigation" (WayTooHigh.com)
Will "Risk Factors" Doom MasterCard's® IPO? (WayTooHigh.com)
"MasterCard's® Legal and Regulatory Risks Threaten ... Its Entire Business Model" (BW)
Banks Set to Bolt From MasterCard Inc.® on May 22 (WayTooHigh.com)
[source: WayTooHigh.com, with link to AP]
[Commentary, WayTooHigh.com, via Reuter's article]
US House Judiciary Committee Antitrust Task Force Hearing Comments (
Click on each of the below witness names to view their provided testimony.
Mallory Duncan Senior Vice President and General Counsel National Retail Federation
Steve Smith President and Chief Executive Officer K-VA-T Food Stores, Inc.
Edward Mierzwinski Consumer Program Director U.S. PIRG
Tim Muris Of Counsel O’Melveny & Meyers
John Buhrmaster President First National Bank of Scotia, New York
[source: U.S. House of Representatives Committee on the Judiciary website]
Mallory Duncan Senior Vice President and General Counsel National Retail Federation
Steve Smith President and Chief Executive Officer K-VA-T Food Stores, Inc.
Edward Mierzwinski Consumer Program Director U.S. PIRG
Tim Muris Of Counsel O’Melveny & Meyers
John Buhrmaster President First National Bank of Scotia, New York
[source: U.S. House of Representatives Committee on the Judiciary website]
"Merchants Call Interchange Fee Practices Violation of Antitrust Laws " (MPC)
WASHINGTON, July 19 /PRNewswire-USNewswire/ -- In testimony prepared for delivery today at a hearing of the House Judiciary Committee's Antitrust Task Force, Mallory Duncan, Senior Vice President and General Counsel of the National Retail Federation and Chairman of the Merchants Payments Coalition (MPC), called the collective setting of interchange fees by Visa and MasterCard a violation of federal antitrust laws that costs merchants and their customers more than $36 billion every year.
"The collective setting of interchange fees by Visa and MasterCard represents an on-going antitrust violations and it costs merchants and their customers tens of billions of dollars annually," Duncan said. "These fees are in addition to the late fees, over-the-limit fees and other card fees with which consumers are only too familiar."
The credit card interchange fee is a percentage of each transaction that Visa and MasterCard and their member banks collect from retailers every time a credit or debit card is used to pay for a purchase. The fee varies with type of card, size of merchant, and other factors, but may be up to two percent or more, or about $2 for a $100 purchase. Visa and MasterCard banks collected more than $36 billion in interchange fees last year, up 17 percent from 2005 and 117 percent since 2001.
According to a recent study, the credit card companies and their banks spend only about 13 percent of the interchange fee on actual transaction processing. The rest goes for marketing, profit, and other things like rewards programs. In his testimony, Duncan points out that because so much of the credit card interchange fee is spent on marketing, consumers themselves end up paying for the millions of unwanted and unsolicited credit card offers that flood their mailboxes every year.
Unlike other credit card fees that show up on monthly statements, the credit card interchange fee is hidden. Visa and MasterCard rules make it practically impossible for merchants to tell customers how much they are really paying. Duncan pointed out that since Visa and MasterCard together control at least 80 percent of credit card purchase volume, merchants have no choice but to accept their cards. Because of the anti-competitive behavior of the big card companies and their banks, interchange fees keep going up, acting as what Duncan calls a "hidden sales tax on U.S. commerce, raising both merchant costs and ultimately the price of goods and services sold to consumer."
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.
SOURCE Merchants Payments Coalition
"The collective setting of interchange fees by Visa and MasterCard represents an on-going antitrust violations and it costs merchants and their customers tens of billions of dollars annually," Duncan said. "These fees are in addition to the late fees, over-the-limit fees and other card fees with which consumers are only too familiar."
The credit card interchange fee is a percentage of each transaction that Visa and MasterCard and their member banks collect from retailers every time a credit or debit card is used to pay for a purchase. The fee varies with type of card, size of merchant, and other factors, but may be up to two percent or more, or about $2 for a $100 purchase. Visa and MasterCard banks collected more than $36 billion in interchange fees last year, up 17 percent from 2005 and 117 percent since 2001.
According to a recent study, the credit card companies and their banks spend only about 13 percent of the interchange fee on actual transaction processing. The rest goes for marketing, profit, and other things like rewards programs. In his testimony, Duncan points out that because so much of the credit card interchange fee is spent on marketing, consumers themselves end up paying for the millions of unwanted and unsolicited credit card offers that flood their mailboxes every year.
Unlike other credit card fees that show up on monthly statements, the credit card interchange fee is hidden. Visa and MasterCard rules make it practically impossible for merchants to tell customers how much they are really paying. Duncan pointed out that since Visa and MasterCard together control at least 80 percent of credit card purchase volume, merchants have no choice but to accept their cards. Because of the anti-competitive behavior of the big card companies and their banks, interchange fees keep going up, acting as what Duncan calls a "hidden sales tax on U.S. commerce, raising both merchant costs and ultimately the price of goods and services sold to consumer."
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.
SOURCE Merchants Payments Coalition
Wednesday, July 18, 2007
U.S. House of Representatives Hearing on Interchange
Hearing on Credit Card Interchange Fees is scheduled for tomorrow by the Judiciary Committee Antitrust Task Force. Click here for more info.
Tentative witness list includes: John Buhrmaster President First National Bank of Scotia, New York; Mallory Duncan Senior Vice President and General Counsel National Retail Federation; Edward Mierzwinski Consumer Program Director U.S. PIRG; Tim Muris Of Counsel O’Melveny & Meyers; and, Smith President and Chief Executive Officer K-VA-T Food Stores, Inc.
[source: U.S. House of Representatives Committee on the Judiciary website]
Tentative witness list includes: John Buhrmaster President First National Bank of Scotia, New York; Mallory Duncan Senior Vice President and General Counsel National Retail Federation; Edward Mierzwinski Consumer Program Director U.S. PIRG; Tim Muris Of Counsel O’Melveny & Meyers; and, Smith President and Chief Executive Officer K-VA-T Food Stores, Inc.
[source: U.S. House of Representatives Committee on the Judiciary website]
Tuesday, July 17, 2007
Latest Credit Card Scheme (commentary: WayTooHigh.com)
From the banner add on Yahoo. If you think these official rules to "win" a trip for four to the World Series is lengthy, you really need only read to the third line:PIN-based and international transactions ineligible. "Why is this scheme so unfair to retailers and cardholders? It forces cardholders to demand that their debit card (PIN transaction) be processed at the much higher signature rates, where rather than a flat-fee, a percent of the transaction charge applies. The only home run here is to the banks and credit card association.
[Commentary: WayTooHigh.com]
[Commentary: WayTooHigh.com]
Monday, July 16, 2007
"Consumers Picking up Tab for Credit Card Junk Mail" (Merchants Payments Coalition)
WASHINGTON, July 16 /PRNewswire-USNewswire/ -- Did you ever wonder who
pays for all the credit card junk mail that's been burying you lately?
pays for all the credit card junk mail that's been burying you lately?
According to new advertisements appearing this week, all Americans do,
thanks to credit card fees that you have probably never even heard of.
The advertisements, placed by the Merchants Payments Coalition, a group
of merchant trade associations seeking a more competitive and transparent
credit card fee system, show how the big credit card companies use some of
the billions they collect from the credit card "interchange" fee to pay for
marketing campaigns, including a mountain of more than nine billion
unsolicited credit card offers that bury our mailboxes every year.
The ads depict a consumer buried in envelopes full of credit card junk
mail, and carry the text: "Ever wonder who pays for all that credit card
junk mail? You do. It comes from your credit card interchange fees.
Interchange is the biggest credit card fee you've never heard of -- and
it's dangerous."
The ads began running in Washington newspapers today in anticipation of
a hearing on interchange fees scheduled to be held Thursday by the House
Judiciary Committee's Antitrust Task Force.
The credit card interchange fee is a percentage of each transaction
that Visa and MasterCard banks collect from retailers every time a credit
or debit card is used to pay for a purchase. The fee varies with type of
card, size of merchant, and other factors, but averages close to two
percent, or about $2 for a $100 purchase. Visa and MasterCard banks
collected more than $36 billion in interchange fees last year, up 17
percent from 2005 and 117 percent since 2001.
According to a recent study, the credit card companies and their banks
spend only about 13 percent of the interchange fee on actual processing.
The rest goes for marketing, profit and other things like rewards programs.
Unlike other credit card fees that show up on monthly statements, the
credit card interchange fee is hidden, and Visa/MasterCard rules make it
practically impossible for merchants to tell customers how much they are
really paying. Instead, merchants are effectively left to include the fee
in the price of merchandise.
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.
SOURCE Merchants Payments Coalition
Wednesday, June 27, 2007
Tuesday, June 26, 2007
Monday, June 25, 2007
Friday, June 22, 2007
"Visa Reveals Plan to Restructure for IPO" (via AP)
If you thought that the "Risk Factors" that MasterCard® described during its IPO filing was frightening, just wait for Vias's® list of reasons to get worried too. As reported today by AP, "The offering will also help insulate member banks from billions of dollars in potential legal damages from antitrust claims brought by merchants".
Just as with MasterCard, Visa too can try to pawn off its legal liabilities onto others, but its prior alleged antitrust violations and legal obligations do not evaporate by selling shares to the public.
Reuters is reporting that "the filing shows that Visa USA members will assume responsibility for a variety of litigation, including antitrust lawsuits in which merchants are accusing Visa and MasterCard of price-fixing.... Visa intends the IPO to fund expansion and help pay potentially heavy legal bills."
These prior WayTooHigh.com postings help explain why, in our opinion, the transferring of ownership does nothing to dissolve their prior damages.
But, the Alleged Crimes Have Already Been Committed (WayTooHigh.com)
Visa's® Planned Restructuring Sounds Like Musical Chairs (commentary: WayTooHigh.com)
"MasterCard's® Legal and Regulatory Risks Threaten ... Its Entire Business Model" (BW)
Banks Set to Bolt From MasterCard Inc.® on May 22 (WayTooHigh.com)
[source: WayTooHigh.com, with link to AP]
Just as with MasterCard, Visa too can try to pawn off its legal liabilities onto others, but its prior alleged antitrust violations and legal obligations do not evaporate by selling shares to the public.
Reuters is reporting that "the filing shows that Visa USA members will assume responsibility for a variety of litigation, including antitrust lawsuits in which merchants are accusing Visa and MasterCard of price-fixing.... Visa intends the IPO to fund expansion and help pay potentially heavy legal bills."
These prior WayTooHigh.com postings help explain why, in our opinion, the transferring of ownership does nothing to dissolve their prior damages.
But, the Alleged Crimes Have Already Been Committed (WayTooHigh.com)
Visa's® Planned Restructuring Sounds Like Musical Chairs (commentary: WayTooHigh.com)
MasterCard's® Legal Bill Could Be $26 Bln (from report in CardLine)
Largest Planned IPO Since Google has No Safety Net (WayTooHigh.com)
MasterCard Inc®. IPO, "The Ultimate Hedge Against Litigation" (WayTooHigh.com)
Will "Risk Factors" Doom MasterCard's® IPO? (WayTooHigh.com)"MasterCard's® Legal and Regulatory Risks Threaten ... Its Entire Business Model" (BW)
Banks Set to Bolt From MasterCard Inc.® on May 22 (WayTooHigh.com)
[source: WayTooHigh.com, with link to AP]
Saturday, June 16, 2007
"Internet Sales in 'Dramatic' Slowdown", Reports the NYT's (Commentary: WayTooHigh.com)
According to Sunday's New York Times, reporters Matt Richtel and Bob Tedeschim (June 17) have a high-profile front page story explaining that the decades' "hypergrowth" of ecommerce purchasing has realized a "dramatic" slowdown. The article, however, does not profile highly innovative companies, such as ScanMyPhotos.com, which created an entirely new business model for super-speedy high-speed photo scanning. But, the story does raise questions that if ecommerce business is slowing, what does that mean for the two leading credit card associations? With nearly all ecommerce and online business beholdened to electronic payments, if there is a significant slowdown from other sectors, what impact will that have on companies like Visa® and MasterCard®. If there is a slowdown, will they simply wield their (and its member banks) unbridled market power to raise interchange fees again to counter any adverse effects to its revenue stream?
ScanMyPhotos.com is owned by 30 Minute Photos Etc., the lead plaintiff in the merchant interchange litigation against Visa, MasterCard and its member banks.
[Commentary: WayTooHigh.com, via NYT's article]
ScanMyPhotos.com is owned by 30 Minute Photos Etc., the lead plaintiff in the merchant interchange litigation against Visa, MasterCard and its member banks.
[Commentary: WayTooHigh.com, via NYT's article]
Thursday, June 14, 2007
Sunday, June 10, 2007
"Maxed Out": The Movie (Click here to view trailer)
Excerpt from the 2005 film documentary, "Maxed Out," via Moviefone. Click here for link to "Maxed Out" website.
'Maxed Out' takes viewers on a journey deep inside the
American style of debt, where things seem fine as long as the minimum monthly payment arrives on time. With coverage that spans from small American towns all the way to the White House, the film shows how the modern financial industry really works, explains the true definition of "preferred customer" and tells us why the poor are getting poorer while the rich keep getting richer. Hilarious, shocking and incisive, 'Maxed Out' paints a picture of a national nightmare which is all too real for most of us."
[Source: Moviefone - available on DVD]
'Maxed Out' takes viewers on a journey deep inside the
American style of debt, where things seem fine as long as the minimum monthly payment arrives on time. With coverage that spans from small American towns all the way to the White House, the film shows how the modern financial industry really works, explains the true definition of "preferred customer" and tells us why the poor are getting poorer while the rich keep getting richer. Hilarious, shocking and incisive, 'Maxed Out' paints a picture of a national nightmare which is all too real for most of us." [Source: Moviefone - available on DVD]
Friday, June 08, 2007
Jim Cramer on MasterCard® (Commentary, WayTooHigh.com)
Earlier this week on TheStreet.com TV, Jim Cramer, the television personality and host of CNBC's Mad Money, might not have realized that his comments actually are in support of retailers and consumers, rather than just more bushish banter for the second largest credit card association.
The merchant-discount antitrust litigation relates to illegal price-fixing. In our opinion, Mr. Cramer effectively supports this allegation by explaining that MasterCard® can raise fees and regularly raises fees, rather than cutting it. Hear it in his own words - click here. And, that is the point, as explained by Mr. Cramer, that MasterCard can raise fees and always raises fees. When you have a growing market and market power, you have the ability to raise fees and can raise fees. Wall Street and MasterCard certainly likes this model, but its customers (cardholders and retailers) are dismayed.
What other cartel do you know which regularly raises fees? Hint: when you use your payment card at the gas station, with every tank fill-up, the windfall profiteering by the merchant interchange fees can be upwards of $2.00 or more.
[commentary: WayTooHigh.com]
The merchant-discount antitrust litigation relates to illegal price-fixing. In our opinion, Mr. Cramer effectively supports this allegation by explaining that MasterCard® can raise fees and regularly raises fees, rather than cutting it. Hear it in his own words - click here. And, that is the point, as explained by Mr. Cramer, that MasterCard can raise fees and always raises fees. When you have a growing market and market power, you have the ability to raise fees and can raise fees. Wall Street and MasterCard certainly likes this model, but its customers (cardholders and retailers) are dismayed.
What other cartel do you know which regularly raises fees? Hint: when you use your payment card at the gas station, with every tank fill-up, the windfall profiteering by the merchant interchange fees can be upwards of $2.00 or more.
[commentary: WayTooHigh.com]
Monday, June 04, 2007
Anatomy of a Gift Card (Commentary, WayTooHigh.com)
Next time you are at the supermarket, reach into your pocket and grab a few coins, or bring along an entire jar of saved change, because quickly counting your money is now easy and super convenient. Even if it is only one-dollar, use a Coinstar coin counting kiosk.
There is a 9% transaction fee [8.9-cents for each dollar]. But, if you choose to order an instant gift card from retailers such as Starbucks, there is no fee or interchange charge. A minute later, your Starbucks-branded gift card is ready for use.
Earlier today, I noticed several consumers charge their lattes on a credit card. What must the added interchange fees be, especially on such a tiny transaction? But, if you use the Starbucks-branded gift card, the interchange fee is zero. Even if you just use it to buy a newspaper. Nonetheless when you choose a bank electronic payment card, where the bank issuer and acquirer could often be the same entity, they are effectively, double billing the merchant, because the fee is the same even if just one bank is handing the entire transaction.
[source: WayTooHigh.com]
There is a 9% transaction fee [8.9-cents for each dollar]. But, if you choose to order an instant gift card from retailers such as Starbucks, there is no fee or interchange charge. A minute later, your Starbucks-branded gift card is ready for use.
Earlier today, I noticed several consumers charge their lattes on a credit card. What must the added interchange fees be, especially on such a tiny transaction? But, if you use the Starbucks-branded gift card, the interchange fee is zero. Even if you just use it to buy a newspaper. Nonetheless when you choose a bank electronic payment card, where the bank issuer and acquirer could often be the same entity, they are effectively, double billing the merchant, because the fee is the same even if just one bank is handing the entire transaction.
[source: WayTooHigh.com]
Tuesday, May 29, 2007
It's a Card Game (WayTooHigh.com)
In Australia, as the Reserve Bank moves to further reduce interchange fees, the banks are shifting their card brands towards Amex, because according to The Australian, those cards are not regulated. We are seeing a growing transformation in the U.S., where banks are issuing Amex-branded cards to replace those of the two leading card associations. This means that consumers and merchants are facing extraordinarily higher fees for processing electronic payments.
Merchant Interchange Fees May Skyrocket (WayTooHigh.com)
American Express Tarnished, the Brand Leader's Cache Faces Saturation (WayTooHigh.com)
MBNA-AmEx Relationship Threatened (The News Journal / Bloomberg News)
[Commentary: WayTooHigh.com]
Prior Related Postings
Merchant Interchange Fees May Skyrocket (WayTooHigh.com)
American Express Tarnished, the Brand Leader's Cache Faces Saturation (WayTooHigh.com)
MBNA-AmEx Relationship Threatened (The News Journal / Bloomberg News)
[Commentary: WayTooHigh.com]
Sunday, May 27, 2007
Friday, May 25, 2007
Wednesday, May 23, 2007
Monday, May 21, 2007
Shouldn't Technology Lower Interchange Fees? (commentary: WayTooHigh.com)
ScanMyPhotos.com, a division of 30 Minute Photos Etc. is profiled in two more leading national magazines [Reader's Digest, June issue. page 197; Women's Health Magazine, June issue. page 56].
What does this have to do with the multi billion dollar antitrust merchant interchange litigation?
Quite a bit.
As technology advances, the costs are supposed to decline; this is further explained by Moore's Law. For us, we invented an entirely new business model that is being followed throughout the photo imaging industry. Rather than charging $5.00 to scan a single picture, we charge just 5-cents for scanning 1,000 photos, or $100 to scan upwards of 1,600 4x6" photos when you fill up our prepaid ScanMyPhotos.com box. But, when it comes to the credit card associations, they allegedly practice anti competitive price-fixing by agreement which is illegal, but helps artifically raise their fees, rather. Think of the old manual credit card imprinters and multi-carbon-copy forms which had to be manually processed, mailed out of state and cleared - that is what the cost-based interchange fees were designed for.
What does this have to do with the multi billion dollar antitrust merchant interchange litigation?
Quite a bit.
As technology advances, the costs are supposed to decline; this is further explained by Moore's Law. For us, we invented an entirely new business model that is being followed throughout the photo imaging industry. Rather than charging $5.00 to scan a single picture, we charge just 5-cents for scanning 1,000 photos, or $100 to scan upwards of 1,600 4x6" photos when you fill up our prepaid ScanMyPhotos.com box. But, when it comes to the credit card associations, they allegedly practice anti competitive price-fixing by agreement which is illegal, but helps artifically raise their fees, rather. Think of the old manual credit card imprinters and multi-carbon-copy forms which had to be manually processed, mailed out of state and cleared - that is what the cost-based interchange fees were designed for.
Related WayTooHigh.com Postings
[Source -commentary: WayTooHigh.com]
Wednesday, May 16, 2007
More Windfall Profitering at the Pumps (WayTooHigh.com)
With renewed attention and motorist outrage, Visa®, the bank-controlled credit card association, along with MasterCard® are reaping more windfall profiteering during our nation's energy crisis - Record pump prices translate into record merchant interchange fees. As gas prices double, so to are the credit card fees paid in interchange charges. Why? And, what happened to the $50 MasterCard-led interchange cap at the pumps that was heralded late last year? What about Visa and its plan for deflecting this growing crisis and attention to charges that it [member banks] too is reaping huge windfall profits as motorists are forced to pay upwards of $4.00 a gallon?
MasterCard's® Planned Interchange Fee Cap For Gas Retailers (WayTooHigh.com)
[Source: WayTooHigh.com]
MasterCard's® Planned Interchange Fee Cap For Gas Retailers (WayTooHigh.com)
[Source: WayTooHigh.com]
So, What Is The Exact Interchange Fee Anyway? (commentary: WayTooHigh.com)
In days, as millions of consumers read about ScanMyPhotos.com - a division of 30 Minute Photos Etc., we face a dilemma. Profiles in the June editions of Reader's Digest and Women's Health Magazine explain the new business we invented for digitally protecting photo memories. What is unclear is one component: what are our electronic payment costs?
As entrepreneurs, we have a mandate to know what all expenses are and quickly choose which vendors to work with. One company, which we have been buying products from since 1990, seems to have become distant and their rates for packaging materials were way too high. So, we did a search and found another suppler with rates nearly half of the other company. After the order, we received two letters of appreciation; clearly, they wanted to earn our business.
As for the credit card companies, Visa® and MasterCard's® nearly 80% market domination is in a different league. Just as we can choose our partners and easily understand exactly what we are paying, as we prepare for this extensive media coverage on our company, we have all costs in check, except our interchange fees.
And, here is why: While the Visa and MasterCard links posted on their websites identify their merchant interchange fees, it is easy to understand why it is clouded, confusing and unfriendly. With the onslaught of new orders we are preparing for, it is anyone's guess what our payment interchanges fees will be.
[source: commentary - WayTooHigh.com]
As entrepreneurs, we have a mandate to know what all expenses are and quickly choose which vendors to work with. One company, which we have been buying products from since 1990, seems to have become distant and their rates for packaging materials were way too high. So, we did a search and found another suppler with rates nearly half of the other company. After the order, we received two letters of appreciation; clearly, they wanted to earn our business.
As for the credit card companies, Visa® and MasterCard's® nearly 80% market domination is in a different league. Just as we can choose our partners and easily understand exactly what we are paying, as we prepare for this extensive media coverage on our company, we have all costs in check, except our interchange fees.
And, here is why: While the Visa and MasterCard links posted on their websites identify their merchant interchange fees, it is easy to understand why it is clouded, confusing and unfriendly. With the onslaught of new orders we are preparing for, it is anyone's guess what our payment interchanges fees will be.
[source: commentary - WayTooHigh.com]
"Visa, CEO Preparing for Initial Public Offering" (The Mercury News)
The below excerpt from an an edited transcript of an interview with Mercury News personal finance reporter Mark Schwanhausser and Joseph W. Saunders, who was just named chairman and chief executive of Visa Inc., was published on May 16, 2007. However, it very well could have mirrored the identical arguments made by the railroad industry in the late 1800s, when they too tried justifying why farmers needed them to bring their goods to market. Back then, there was no Antitrust Act, but it was the force which caused its creation - to stop collusion to illegally fix prices.
For Mr. Saunders to opine that "we're not as far apart [on the rebellion against interchange fees] as some people may think" is distance from our prospective.
As a merchant, ecommerce business owner and lead plaintiff who is on the front line - dealing with consumers every day - we know differently. The reality is that our customers, along with fellow business owners continue to applaud our efforts, even as more merchant interchange fees continue to increase. We are about as far apart as were the framers in the late-1800s who faced monopolistic controls by the railroad titans who forced unbridled rate increases while applying talking points parroted by Mr. Saunders.
[from The Mercury News, see link]
Q How do you plan to soothe merchants who are rebelling over interchange fees?
A Ironically, I think we work on that all the time. Even while this litigation is going on, we've made a number of arrangements with a number of merchants, and I would say we're not as far apart as some people may think. It's a situation where we need each other. We provide services for them, and they provide an outlet for us. We need to continually work to make sure that relationship improves over time. It's clearly something we need to work on.
Q Is the key relationships or pricing?
A It comes down to the point when merchants feel there is value for the service we provide. Now, remember that at this particular point in time Visa does not have direct relationships with the merchant. The relationship is through the banks and third parties. The rub is that the suit is about the interchange rates. But it does still come back to showing the merchant that there is value in what we provide. And there is a lot of value, by the way.
[source: WayTooHigh.com, via The Mercury News, May 16, 2007]
For Mr. Saunders to opine that "we're not as far apart [on the rebellion against interchange fees] as some people may think" is distance from our prospective.
As a merchant, ecommerce business owner and lead plaintiff who is on the front line - dealing with consumers every day - we know differently. The reality is that our customers, along with fellow business owners continue to applaud our efforts, even as more merchant interchange fees continue to increase. We are about as far apart as were the framers in the late-1800s who faced monopolistic controls by the railroad titans who forced unbridled rate increases while applying talking points parroted by Mr. Saunders.
[from The Mercury News, see link]
Q How do you plan to soothe merchants who are rebelling over interchange fees?
A Ironically, I think we work on that all the time. Even while this litigation is going on, we've made a number of arrangements with a number of merchants, and I would say we're not as far apart as some people may think. It's a situation where we need each other. We provide services for them, and they provide an outlet for us. We need to continually work to make sure that relationship improves over time. It's clearly something we need to work on.
Q Is the key relationships or pricing?
A It comes down to the point when merchants feel there is value for the service we provide. Now, remember that at this particular point in time Visa does not have direct relationships with the merchant. The relationship is through the banks and third parties. The rub is that the suit is about the interchange rates. But it does still come back to showing the merchant that there is value in what we provide. And there is a lot of value, by the way.
[source: WayTooHigh.com, via The Mercury News, May 16, 2007]
Monday, May 14, 2007
MasterCard Worldwide® Sweepstakes More Like "Cheap"-stakes (commentary WayTooHigh.com)
Just like the myriad of other promotional campaigns offered by the two leading card associations, here is one more example of how merchants and cardholders are misled and affected by interchange fees - without even noticing. According to a Businesswire MasterCard Worldwide® release today, the company, along with The Home Depot Announced a "$100,000 Backyard Retreat'' Sweepstakes. Use your MasterCard cards to "automatically enter[ed] for a chance to win a $100,000 Backyard Retreat."
The catch? Read the fine print: PIN-based transactions are not eligible.
What this means is that it forces cardholders to demand that retailers electronically process their payments at the oftentimes much higher credit card rate, rather than at the flat-fee PIN-based rates. What a deal: MasterCard provides one lucky recipient with $100,000, yet retailers are forced to pay out huge interchange fees to the card associations and member banks.
See BW release
[Commentary: WayTooHigh.com]
The catch? Read the fine print: PIN-based transactions are not eligible.
What this means is that it forces cardholders to demand that retailers electronically process their payments at the oftentimes much higher credit card rate, rather than at the flat-fee PIN-based rates. What a deal: MasterCard provides one lucky recipient with $100,000, yet retailers are forced to pay out huge interchange fees to the card associations and member banks.
See BW release
[Commentary: WayTooHigh.com]
Wednesday, May 02, 2007
Monday, April 23, 2007
Wednesday, April 18, 2007
Friday, April 13, 2007
"Credit Card Fees Surged 22 Percent" (via NACS)
According to a recent NACS news release, "Credit card fees surged 22 percent, rising $1.2 billion to reach $6.6 billion in 2006 and for the first time ever top overall industry profits. Credit card fees now are the industry's second largest expense, accounting for 8.3 percent of industry gross margin dollars, second only to total labor expenses (33.5 percent)."
[Source: via NACS]
[Source: via NACS]
Thursday, April 12, 2007
Friday, April 06, 2007
Wednesday, April 04, 2007
Monday, April 02, 2007
"First Data Agrees to be Sold to KKR for $29 Bln " (via Reuters)
NEW YORK (Reuters) - Credit-card and payment processor First Data Corp. has agreed to be acquired by private equity firm Kohlberg Kravis Roberts & Co. for about $29 billion cash, but plans to actively seek other bids...
[Source: via Reuters]
[Source: via Reuters]
"Card Issuers, Retailers at Odds" (via LA Times)
In the April 2nd front page (business) Los Angeles Times feature, a vice president at Visa USA® noted that her local deli does not accept Visa. The article also mentioned that "credit card executives say merchants can always choose to stop accepting their cards." This same argument could have transpired by the robber barons of more than a century ago - which led to inacting the Sherman Antitrust Act. Just as Visa and MasterCard® control an 80% market share of the electronic payment card market, those who controlled the railroads expressed the same callous remarks to farmers when they too explained that they don't have to use the rails to get their goods to market. The same card association executive should have wondered what would happen if her local deli was also operating an internet food delivery business too. Think Zaber's in New York City, they also operate a deli, but without credit cards they would have to close down their ecommerce business. For us, our ecommerce business is 100% reliant on credit and debit card transactions. We are forced to accept their fees and unbridled anticompetitive price-fixing by agreement.
[Source: WayTooHigh.com commentary in response to the April 2, 2006 LA Times article]
[Source: WayTooHigh.com commentary in response to the April 2, 2006 LA Times article]
Saturday, March 17, 2007
Thursday, March 15, 2007
"Visa Hikes Merchant Fees on High-Limit Card" (via BankNet 360)
According to BankNet 360, "merchants will pay an average of 14% more per transaction when customers use their new Signature Preferred Visa card. Visa USA Inc. said next month it will start issuing the high-end plastic line to its 'bigger spenders,' those who charge more than $50,000 a year... The hike is likely to exacerbate tension between the card industry and retail merchants who say they already pay too much in interchange fees."
WayTooHigh.com Commentary: More fee increases? As lead plaintiff in what is one of nation's largest antitrust litigation's, we thought the card associations and its member banks would temper their allegedly brazen anticompetitive illegal price fixing, but apparently not. Rates keep rising, while other technologies keep lowering their fees.
Two recent national newspaper's (WSJ and USA Today) recently profiled our use of technology to increase efficiencies and lower prices. Even one of our vendors just switched from thick, carbon-copy service reports to smart, single page electronic forms which cut costs and enhanced efficiencies. Another example: a study of the cost of one TeraByte of storage; it cost a whopping $1 million in 1992. Within one year, the cost was cut in half to $550,000. By 1997, it was $50,000 and in 2,000 the cost was $8,500. This year, a consumer can easily buy one TeraByte of storage for $130. From $1 million to $130 in just over a decade. Now look at merchant fees; since 1999 the interchange fees for debit cards have risen about 300%.
[Source: via BankNet 360, subscription required]
WayTooHigh.com Commentary: More fee increases? As lead plaintiff in what is one of nation's largest antitrust litigation's, we thought the card associations and its member banks would temper their allegedly brazen anticompetitive illegal price fixing, but apparently not. Rates keep rising, while other technologies keep lowering their fees.
Two recent national newspaper's (WSJ and USA Today) recently profiled our use of technology to increase efficiencies and lower prices. Even one of our vendors just switched from thick, carbon-copy service reports to smart, single page electronic forms which cut costs and enhanced efficiencies. Another example: a study of the cost of one TeraByte of storage; it cost a whopping $1 million in 1992. Within one year, the cost was cut in half to $550,000. By 1997, it was $50,000 and in 2,000 the cost was $8,500. This year, a consumer can easily buy one TeraByte of storage for $130. From $1 million to $130 in just over a decade. Now look at merchant fees; since 1999 the interchange fees for debit cards have risen about 300%.
[Source: via BankNet 360, subscription required]
Monday, March 12, 2007
Sunday, March 11, 2007
Friday, March 09, 2007
Thursday, March 08, 2007
Monday, March 05, 2007
Interchange Fee Justification (WayTooHigh.com)
Years ago, when merchant interchange fees were purely cost-based, there was a level of understanding about the costs associated with the charges. However, we keep noticing new adventures in unwarranted fee increases; most recently MasterCard Worldwide's® planned fee increases.
Do you remember when you were first issued a credit card? Seemingly, the expiration date was within 12-months, or within a very brief period. The banks which controlled the card association's would be forced to regularly reissue the cards. There were all types of fulfillment and processing fees associated with the card renewals. However, at technology advanced, the banks were able to cut costs by issuing cards with expiration dates lasting longer than many relationships. Years ago, retailers were provided with thick books listing each unauthorized card. Imagine having to manually pause to track whether a card was not to be processed. Today it is instant and all electronic, yet the fees continue to increase. Didn't it cost a great deal of money to publish and mail out those weekly unacceptable card reports?
Our retail and ecommerce business regularly receives cards that actually expire in 2011 - four years from today. Think of the implied cost savings that should bring down the merchant interchange fees, as fewer costs are incurred by issuing cards with such distant expiration dates.
Justifying interchange fees and its associated increases are becoming more magical and creative with each passing day.
[Commentary: WayTooHigh.com]
Do you remember when you were first issued a credit card? Seemingly, the expiration date was within 12-months, or within a very brief period. The banks which controlled the card association's would be forced to regularly reissue the cards. There were all types of fulfillment and processing fees associated with the card renewals. However, at technology advanced, the banks were able to cut costs by issuing cards with expiration dates lasting longer than many relationships. Years ago, retailers were provided with thick books listing each unauthorized card. Imagine having to manually pause to track whether a card was not to be processed. Today it is instant and all electronic, yet the fees continue to increase. Didn't it cost a great deal of money to publish and mail out those weekly unacceptable card reports?
Our retail and ecommerce business regularly receives cards that actually expire in 2011 - four years from today. Think of the implied cost savings that should bring down the merchant interchange fees, as fewer costs are incurred by issuing cards with such distant expiration dates.
Justifying interchange fees and its associated increases are becoming more magical and creative with each passing day.
[Commentary: WayTooHigh.com]
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