Interchange Revenues Leap Over Holidays (

December 27, 2005

With consumer spending up nearly 9% from holiday shopping, what exactly did the banks earn and how much did retailers have to pass along to Visa and MasterCard for credit and debit card transactions?

Because merchant interchange fees are an elusive component of bank profits, and because there are nearly one-hundred separate charges, it is anyone’s guess how well the banks did from soaring holiday shopping. We know that MasterCard Advisors, a unit of MasterCard International said that holiday shopping was up 8.7% ahead of last year.


Is MasterCard International’s Due Diligence Lacking? (

December 23, 2005

An open-letter to MasterCard International’s president and CEO, Robert W. Selander and to the company’s general counsel and secretary, Noah J. Hanft

Dear Messrs. Selander and Hanft,

With just weeks away from seeking the financial confidence and $2.5 billion from public investments, the second largest bank-owned credit card association, MasterCard International, has yet to update its website.

For months, The Credit Card Interchange Report – has been mentioning that the website continues to post a timeline from only previous merchant litigations.

As the bank-owned credit card association now faces multiple antitrust actions targeting the core of its revenue stream and because this price-fixing antitrust case is among the largest in our nation’s history, why is there such a void?

MasterCard continues to fail in making sure that the case is clearly referenced on its company information litigation page. There is no mention at all.

Viewing the MasterCard International website suggests that the banking industry is mystifyingly protected from complying with the Sarbanes-Oxley Act, which oversees corporate governance and reporting practices. The Sarbanes-Oxley Act Section 409 pertains to ‘Real Time Issuer Disclosures,’ where companies are required to disclose to the public, on an urgent basis, information on material changes in their financial condition or operations. Ordinarily, these disclosures are to be presented in terms that are easy to understand and supported by trend and qualitative information of graphic presentations as appropriate.

So, why is there no clearly presented disclosure information on the MasterCard International website?


Mitch Goldstone and Carl Berman
The Credit Card Interchange Report –


MasterCard, Inc. uses disadvantaged as pawn in the IPO scheme (

December 23, 2005

The MasterCard planned IPO is gaining even more attention for its schemes and gimmicks. The latest, as reported by Reuters is to bestow 10% of the investors proceeds as a ruse to fund a MasterCard Foundation Charity.

The hubris of using other people’s money to fund goodwill philanthropy by the 1400 banks which own the credit card association is unconscionable. Has any other multi-national corporation ever devised this type of scheme to deflect and use investors money for this type of cause?

In addition, MasterCard is also planning to use upwards of $650 million from the IPO proceeds to battle 30 Minute Photos Etc. and the other merchants who are standing up to their price-fixing charges and anticompetitive antitrust violations.


What’s at Stake in the Interchange Wars (Green Sheet)

December 23, 2005

Interchange, once a minor fee levied to cover the costs of processing a credit card transaction and the risk assumed by the issuing bank that the credit will not be repaid, has skyrocketed to a flashpoint that industry experts say is certain to change the industry, although opinions are divided on exactly what the fallout may be.

Interchange is also a significant, and growing, expense for merchants. According to the National Association of Convenience Stores (NACS), credit and debit card fees are the third largest expense convenience stores face after store rent and labor costs.
These fees are anticipated to match the cost of store rent by 2020.

NACS points out that in 2004, credit card issuers earned more profits in interchange fees from the sale of gasoline than gasoline retailers earned off those same sales. “Out-of-control interchange fees for credit card transactions are a $25 billion tax on retail transactions that goes straight into the pockets of the card issuers,” said Mitch Goldstone, lead plaintiff in a merchant class action antitrust lawsuit filed in June against Visa and MasterCard.

Goldstone is also Co-editor of “The Credit Card Interchange Report” ( “We’re not opposed to a cost-based interchange,” he said. “The problem is the banks got greedy and raised the rates just to make more money.”

Merchants point out that interchange fees have declined or are declining in most other countries but are steadily rising in the United States. “If interchange was actually cost based, it would effectively disappear,” Goldstone said. “In Australia it is less than half a percent. And Canada is a great example: Business is thriving even though the interchange rate is zero.”

This complexity is one factor that is fueling the debate. “I know exactly what my cost of goods sold are, what every cost involved with my business is, but I don’t have a clue what my interchange fee is,” Goldstone said.

(Click here to view entire article).

[source: Green Sheet]

American Express Tarnished, the Brand Leader’s Cache Faces Saturation (

December 21, 2005

In what was anticipated to be a smooth marketing alliance between the banks and American Express’ branded cards, might now be embarking on roaring discord among retailers. Even cardholders are beginning to understand that using new super-high-margin Citigroup, Bank of America or HSBC charge cards with the American Express logo may lead to even higher merchant interchange fees. The new American Express logo on these cards will most likely yield soaring new hidden taxes on consumers.

As reported in the Wall Street Journal (Dec 21 – page, C3), Bank of America chairman and CEO, Kenneth D. Lewis believes that it is difficult to partner with a business they are in litigation against. However, while they settled with American Express, the bank is party to a multi-billion dollar antitrust class-action launched by merchants who accept Visa and MasterCard.

While Kenneth Chenault, chairman and CEO of American Express asserted in the same WSJ article that “the economic opportunity is tremendous,” his focus was distracted and myopic. Clearly, the banks and American Express are so entrenched in their orgy of boardroom domination that they truncated the focus group component; if only they involved current cardmembers and retailers. This contentious plan to flood the market with millions of new American Express branded cards, and potentially spike interchange rates will not be supported – even with hundreds-of-millions of dollars certain to be spent advertising this alliance.

For the premium “Platinum” American Express cardholders and the even more exclusive “Black” American Express cards, the appeal and benefits of distinction from these exclusive cards are about to be diminished.

This new alliance with the New York financial-services company is the latest scheme by banks which may outrage retailers and even decimate the venerable American Express brand. Even its cache as the recognized and respected customer-oriented, world leader in quality is at risk. It could be doomed as the strength of its exclusive image will be saturated with millions of new American Express logos popping up everywhere.

Several months ago, The Credit Card Interchange Report – reported on 26 leading issues affecting credit card interchange fees. Two of the primary assertions follow which initially drew attention to what is now about to occur.

* Because banks are now permitted to issue Amex and Discover cards, MBNA and Citibank plan to issue American Express cards, which means, merchants will be flooded with the higher costing premium cards (this translates into a 50% increase in costs from about 140 bp [basis points] to 210 bp. I anticipate they will then convert their classic cards to higher priced “signature” “affinity” and “business” cards.

* The argument by American Express was that their cardholders spend more money. Perhaps this is based on buying diamonds and luxury items, but when you are at a convenience store, the amount charged from a Visa card is typically the same as for American Express. As MBNA and Citibank switch from Visa to American Express, they are appealing to the same group of cardholders with the same spending patterns.


CBS Reports Online Gambling Earning Billions; Banks Profit Too

December 20, 2005

Millions of merchants and consumers are not the only groups affected by the banks price-fixing, interchange fees. Illegal online casino gambling is now a multi-billion dollar off-shore industry which generates huge returns to Bank of America, JP Morgan Chase, Wells Fargo, Citigroup and the few thousand other banks which own MasterCard and Visa.

Click here for an update from the November broadcast on CBS’ 60 MINUTES which profiled why this is so damaging.

CBS: “I-Gaming: Illegal And Thriving. Billions of dollars are being spent on online gambling Web sites and the majority of that cash comes from American pockets. Despite being illegal in the U.S., Lesley Stahl reports, the industry is thriving.” [What few understand is that the banks can be indirectly involved for reaping a percent of every transaction when their debit or credit cards are used. Although banks decline charges to many of these overseas businesses, there are websites to help identify ways to get your charge card approved].


MasterCard IPO Might Be Price-Less (

December 19, 2005

MasterCard’s IPO might just be “price-less,” suggests The Credit Card Interchange Report – The credit card giant is poised to debut a nearly $2.5 billion public offering, but recent articles suggest that the public might become weary of the the planned use-of-proceeds.

The Wall Street Journal on Mon, Dec 19th explained that not all announced IPO deals which are filed actually are completed. expects that the 1400 banks which owns MasterCard, Inc. might have a challenging time trying to unload their credit card interchange liability. The Journal profiled several companies, including Boise Cascade which pulled its IPO after putting it on hold. is closely monitoring the offering to look for signs that MasterCard also might place its planned stock sale on hold or even withdraw it in early 2006.

For background, click here.