The Anatomy of How Visa and MasterCard Get a Cut From Charitable Donations ( commentary)

March 31, 2006

Use your Visa or MasterCard to make a donation to the American Red Cross, a local nonprofit, or even to help feed the hungry and the banks also gets a cut. There is no negotiating on interchange fees. If a wealthy contributor uses a premium affinity card, which merits free airline miles, then not just the donor, but the charity is also taken on a ride.

From just one story shared with us: After toiling for weeks to prepare for a major gala fundraiser which raised nearly $50,000 for a nonprofit organization, the bank-owned credit card associations also attended the affair – in a big way. An associate from a local foundation explained that their directors were livid when the bill came due. After all the work invested to raise the much needed funding, about $1,200 was taken off the top to pay for the bank interchange fees. Remember, this was a nonprofit which had to pay the banks in order to provide a card payment option.

Because foundations understand that convenience and simplicity help expedite contributions, they must accept Visa and MasterCard. However, unlike all the other service providers, they are unable to negociate their rates. What the donors and organizations may not realize is that a high percent of the proceeds are paid in interchange fees. For automatic monthly donations, an interchange fee is paid every month. For non-electronic transactions which require manual card imprints, the fee could be four or five percent of the total transaction. Or, much greater when premium cardholders contribute.

In this case, the bank offered the group free checking and free use of the credit card equipment, but they still charged about $1,200. Think of how vital $1,200 would have been for the nonprofit and how it instead was used to fund the banks multibillion dollar interchange scheme. But, the bank was benevolent. They did offer the group free checking, which may otherwise cost, what, five-dollars a month? And, they kicked in a free card terminal. Freakishly, that almost sounds like what an unscrupulous person selling illegal drugs might do; provide free needles but charge for the fix.

Last Summer, immediately after the Hurricane Katrina disaster, we contacted MasterCard and Visa’s CEO to request that they rescind the interchange fees for donations to the relief efforts, as otherwise the banks were profiteering from this national calamity. In the same request was a plea to also rescind the interchange fees motorists pay when filling up their cars. Gas prices had doubled and threatened our economy. Why should Visa and MasterCard have reaped windfall profits and taken advantage of our fiscally ruinous energy crisis? Just as with donations to non profits, the banks were silent in action on arresting interchange fees for these categories.


30 Minute Photos Etc.® (lead plaintiff) Profile (Photo Trade News)

March 29, 2006

Photo Trade News® , by Jerry Lansky, Excerpt:

Every industry has its “go-to” guy. Whenever we talk about a moon shot, Walter Cronkite is called on to comment. When it’s a matter of international relations, it’s Henry Kissinger (though of late, retired newsman Dan Rather is frequently sought for an opinion).

The retail photo processing industry has its own spokesman of sorts. Maybe not with quite the global stature of the aforementioned, but without the grey hair. It seems as though when there’s a newspaper or magazine article having to do with on-site processing, chances are you’ll see him being quoted as an industry spokesman.

Our industry go-to is Mitch Goldstone. His name pops up in The Wall Street Journal, The New York Times, LA Times, wire services, magazines, and other media. When there’s a hot topic, Mitch gets called. Sometimes he initiates the call to express his opinion—of which he has many. Then there are Mitch’s somewhat quixotic pursuits, like the current one in which he is the lead complainant in a multibillion-dollar suit against Visa, MasterCard, and some large banks. The entire retail world, including the U.S. government (which has a $100 million stake in the suit), hopes he succeeds.

[source: Photo Trade News® , March 2006]

Amex® / MasterCard® co-branded Cards (

March 29, 2006

Westpac® , and Australian-based bank is issued a dual-branded Amex® / MasterCard® . When a retailer does not accept American Express® , the card would be used as a MasterCard® . Australia’s leading paper, The Herald Sun described how the card will work, but as with other commentaries on these new American Express® co-branded card, the question surrounding interchange fees remains unanswered.

[source:, as read in The Herald Sun, March 28]

Washington Mutual’s® "Free Checking" (

March 28, 2006

Washington Mutual® , a named defendant in the antitrust price-fixing litigation, is promoting a new campaign for what it calls “Free Checking.” What else is free are the interchange charges when writing checks, which unlike electronic payment transactions, face the economic burden of clearinghouse and other payment costs. The Washington Mutual® marketing campaign draws attention to the question of why there are interchange fees for credit and debit card transactions, yet none for writing checks?


"Court Battle Looms Over Credit Card ‘Hidden Tax’" (Competition Law 360)

March 28, 2006

“Fed up with what they consider a “hidden tax” for merchants and consumers by credit card companies and their banks, merchants have decided to fight back with a large-scale antitrust class-action lawsuit against the major credit card companies. But past court decisions that have sided with the credit card companies could prove a significant challenge for the merchants as they fight their way through court.”

[subscription required]

(repost from Jan 20) "Credit Card Price Fixing Suit Could Cost Industry Over $100 Billion, Experts Say" (Banking Business Review)

March 25, 2006

(repost from Dec 21) American Express® tarnished, the brand leader’s cache faces saturation (

March 24, 2006