"An increase of ‘intercharges’" (Gannett News Service)

July 31, 2006

"Credit or Debit?" (ConsumerAffairs.com)

July 31, 2006

Who Is The Real Violator? (WayTooHigh.com)

July 30, 2006

Merchants Too Should Alert Visa®, MasterCard®, the Issuing and Acquiring Banks When Cardholders Force Them to Run Debit, ATM and Check Cards at the Much Higher Credit Card Rate.

Having become among the key personalities and being so embedded in the merchant interchange battle, it seems that each day brings us new issues to discuss.

Today’s topic –

The leading credit card associations – with a staggering 80% market grip – go to great lengths to encourage cardholders to report businesses which violate their merchant card agreements. If a retailer displays a MasterCard® logo but declines any payment card purchase or refuses to accept charges below a certain dollar amount, consumers are asked to turn them in.

A website link will alert the card associations and their issuing banks of these infractions. They want to also know if the retailer required identification (remember, Visa® and MasterCard® explain that interchange fees are designed to cover fraud costs). Did the merchant impose an additional levy for paying with plastic? They also want to know.

Conversely, there are many tricks and marketing gimmicks designed to help the banks make more money when cardholders use their PIN cards as traditional credit card transactions. The card associations have several customers; the acquiring and issuing banks (often the same entity); the merchants which accept their cards; and, the cardholders. However, Visa® and MasterCard® seem less interested in helping merchants save money.

Why does MasterCard’s® interactive “Contact Us” website link only enable consumers to turn in retailers? Although not a violation of their merchant agreement, why are there not reciprocal feedback links for retailers to submit instances when debit card holder insists on having their ATM and PIN cards processed at credit card rates?

While merchants are prohibited from identifing the interchange fee on customer receipts, it would be interesting if retailers did provided a fact sheet explaining more about interchange fees and the real costs at check out.

[Debit card interchange fees have a fractional, fixed interchange fee of about 25-50-cents per transaction. But when a PIN card is used as a pen (signature credit card), the merchant is forced to pay upwards of 2-percent. On a $1,000 purchase, rather than paying a 50-cent interchange fee, retailers could be charged about $20 or more].

Every day, 30 Minute Photos Etc®. faces this dilemma; customers insist we accept their payment at the much higher credit card rate. Whether a debit card is used as a PIN or signature card, the funds are immediately withdrawn from the cardholders account. It makes no difference to the cardholder, unless there are games to promote the latters use.Just last week, one of our regular retail customers explained they saw a TV news segment on identify theft and was advised to never use a PIN transaction because their identify could be stolen if they entered their personal identification number into a retailers’ terminal.

We cannot help but wonder which financial institution might have pitched that “story” to the media?

Banks are promoting debit card customers chose signature transactions because merchants pay much more – yielding greater new revenue centers at the expense of consumers. Banks even charge a fee if cardholders chose to use their debit cards directly. This, along with many reward programs when debit cards are used instead as signature cards, discourages its use and unfairly taxes everyone.

Wells Fargo® charges a dollar in fees each month when PIN cards are used to make check card purchases. The reward programs include hidden costs which on the surface might be appealing, but those free trips and perks are costly. What a game – 4,000 Visa Extra Points® will earn you a ten dollar clothing store gift card when you sign for debit card purchases.

The card associations and their member banks promote the use of debit cards, but then scheme to mislead consumers into having merchants transact the charge at much higher credit cards interchange rates.

WayTooHigh.com – The Credit Card Interchange Report would like to see merchants also contact the card issuing financial institutions and use these “Contact Us” forms to share their stories. Often, you will find the bank’s toll-free number on the back of the cards.

Since most of Visa’s® member banks also hold the identical position with MasterCard®, just use the existing MasterCard® “Contact Us” link to share your story. You have up to 5,000 words to explain your anguish and send a message about being forced by cardholders to pay erroneously excessive fees.

[Commentary: WayTooHigh.com]

"Cost of Credit-Card Enticements for Consumers Add Up" (Letter, Orange County Register, July 30)

July 30, 2006

The avalanche of seemingly free enticements that credit-card companies offer is not free at all when you factor in the interest and fees that consumers pay, including charges they don’t even know about [“Credit-card users reap the rewards,” July 12]. The most costly of these is the hidden “interchange fee,” averaging up to 2 percent on each and every plastic payment.

Interchange fees cost consumers $26.3 billion in 2004 alone – more than late fees, cash-advance fees and annual credit card fees combined. Most consumers don’t know about interchange fees because retailers like my company pay them and must build them into the cost of products. Credit-card company rules prohibit retailers from disclosing the interchange fee on receipts.

These fees help pay for all the “free” airline miles, gasoline, mortgage rebates, restaurant meals and vacations. They also help pay for the 6 billion credit-card junk solicitations that consumers now receive each year.

When consumers cash in their credit-card awards, they are simply recovering money already spent on credit-card payments. Those consumers who don’t or can’t are simply losing money in this credit-card rewards game.

[Source: Orange County Register, “Letters to the Editor“, William R. MacAloney, Chairman and CEO, Jax Markets, Anaheim, CA]

"Credit Card Hike in Fees Hurt Small Businesses" (Commentary: Ohio Rep. Tom Brinkman Jr. (R)- Community Press)

July 29, 2006

As a state representative, I spend a lot of time talking to local business leaders in my community about the challenges they face to have a successful business.

We enormously appreciate these businesses for the economic contribution they make in our community. They provide jobs for our friends and neighbors, pay state and local taxes, and give back to the community through sponsorships of the local youth baseball and other philanthropic activities. As an elected official, I feel that it’s important for me to do my part to help create an environment in which the spirit of entrepreneurship can flourish.

Recently, a growing problem has had an increasingly detrimental effect on small and family-owned businesses. As if rising gas prices and taxes weren’t enough, the credit card companies have been hiking their interchange fees. These are the fees that the credit card companies charge merchants for the “privilege” of accepting their cards.

Interchange is probably the biggest credit card fee you’ve never heard of. Specifically, the interchange fee is a percentage of each transaction that Visa and MasterCard banks collect from merchants every time a consumer uses a credit or debit card to pay for a purchase. The fee varies with type of card, size of merchant and other factors, but averages close to 2 percent for credit card and signature debit transactions. Think of it this way: When gas costs us $3 a gallon, six cents of that goes to the credit card companies.

These hidden fees drive up the cost of goods and services for all consumers whether they pay with plastic, cash or check, and it makes it difficult for our community retailers to make a living. Some of my community’s retailers paid more in interchange fees to Visa and MasterCard than they made in profit. That’s not fair and it needs to change.

Additionally, Visa and MasterCard wrote the rules that make it virtually impossible for merchants to tell consumers how much interchange fees cost them; the fees remain hidden. Consumers paid more than $26 billion in interchange fees last year, nearly double the amount they paid in credit card late fees and six times what they paid in ATM fees. That’s outrageous!

How can this happen? With about 80 percent of the card market, Visa and MasterCard are monopolies and control a system that is fundamentally anti-competitive. Visa member banks collectively agree to charge the same interchange rates. MasterCard member banks do, too. This price-fixing hurts all Americans and must stop.

Just as with ATM fees, consumers have a right to know what their credit cards are costing them. Transparency and competition are good for consumers and merchants alike. Without them, Visa and MasterCard can fix these fees in secret and we all end up paying the credit card companies more and more and more.

It’s time for Congress and other regulatory agencies to look into these outrageous fees. When credit card companies are forced to explain their fees, practices and policies in public, consumers win.


"Credit Card Issuers Agree to $336 million Settlement" (AP)

July 29, 2006

Wall Street Gives Credit to MasterCard (CNNMoney.com)

July 28, 2006