More Bank Profiteering From Record Gas Prices (

September 29, 2007

Regularly, interchange fee increases take place in the Fall and mid-Spring. We are closely monitoring to see whether Visa® and MasterCard® will be even more brazen and again hike their fees. But, one sector of our economy is posed to create unheard of profiteering for the card associations and its tens-of-thousands of member banks. We also wonder if the financial turmoil in the world credit cards, might create an opportunity for the banks illegally raise prices by agreement as they seek new profits by raising their interchange fees to cover the mortgage meltdown?

As gas prices continue to soar, so too is interchange fee profiteering, due to what we assert are illegal price-fixing by agreement and absolute market power (Visa and MasterCard’s network controls about 80% of the electronic payment business).

Rather than rescinding their unjustified hidden-taxes on motorists and our entire economy, we are alarmed to learn that, according to The Wall Street Journal (page 1. Sept 29) [click here to read the article – subscription required], gas prices could rise to $100.00 a barrel. The two WSJ reporters, Peter Fritsch and Kelly Evans, explained how the U.S. economy could withstand $100 a barrel oil, but they were absent in also mentioning exactly what that stratospheric rate would do to the banks’ bottom line. Nor did they explain how the banks can possibly justify this extraordinary profiteering as our nation faces such a burdensome economic energy crisis.

Forget, for a moment, ExxonMobil and other gas companies’ earnings, and pause to ask why exactly are credit card interchange fees based on a percent of each sale? Even Realtors are dealing and lowering their once standard 6% commissions; in this case the banks are reaping about 1.7% off the top from every credit card charge at the pumps. Could they be earning as much as $2.00 – $3.00 from every fill-up, especially as motorists are now more inclined to use plastic, as they do not have enough cash on hand?

Last year, MasterCard announced they were instituting a $50.00 interchange fee cap at the pumps. Visa, however, has been silent on the issue, and we are unsure whether the fee limit by MasterCard ever took effect.

Either way, since many of the same banks which control MasterCard, also have stakes in Visa, it is really a giant shell game anyway.



The Battle Against Interchange Fees is Global [See Website:

September 28, 2007 – The Credit Card Interchange Report has been providing daily news and commentary updates on our battle against merchant interchange fees for nearly 2 1/2 years, but our cause is not just domestic within the United States. EuroCommerce is hosting an outstanding website that further cements the critical multi-billion dollar issues that affects all retailers in Europe and across the globe. Next month, we [30 Minute photos Etc. and] will be attending and speaking at a photo industry convention in the UK and will be interested in gaining first-hand prospectives from other retailers on how the interchange extortion is affecting them as well.

The below highlights are from the website. Click here to read more.

  • Did you know? Visa and MasterCard argue that the hidden fees – which cost Europe €25 billion every year – are essential to run card schemes. Why then are there some card schemes in Europe which operate successfully without hidden ‘interchange’ fees?
  • “My bank told me the fee covers processing costs for Visa and MasterCard. But I read that only 13% of the fees go toward these costs, with the rest going to bank profits, and rewards for the select few cardholders. What’s the deal?”
  • Europe’s retailers want the best for Europe’s shoppers – in terms of price, quality, service and choice. But prices in Europe are artificially inflated because of hidden fees for debit and credit cards – fees which all shoppers end up paying for. We believe Europe’s shoppers have the right to know …
  • What is happening in Europe is not an isolated case. Visa, MasterCard and the banks that hide behind them try around the world to continue and spread their anti-competitive activities. Yet in some countries, they are no longer able to get away with it.
  • According to US Senator Arlen Specter: “We may need to modify our antitrust laws to stop credit card companies from engaging in activities to gouge and jack up prices.”
  • According to Philip Lowe, Assistant Governor of the Reserve Bank of Australia: “These fees are not subject to the normal forces of competition and in the RBA’s view were distorting the use of payment methods in Australia.”
  • MasterCard and Visa and their interchange fees have also aroused the interest of regulatory authorities and central banks in a range of further countries across the world. These include: Brazil, Columbia, Mexico, South Africa, Singapore, Switzerland, and Israel.
  • What is happening in Europe is not an isolated case. Visa, MasterCard and the banks that hide behind them try around the world to continue and spread their anti-competitive activities. Yet in some countries, they are no longer able to get away with it.
  • Why is it anti-competitive? Unless constraints are imposed by regulators, payment card companies and their banks can increase interchange rates at any time by any amount. In the words of the European Competition Commissioner, Neelie Kroes, “these high fees are a result of a lack of competition in a market where 95% of cross border payments in Europe are made by two companies. The situation is even bleaker in some Member States, where there is only one single acquiring bank servicing retailers.”
  • Why are interchange fees unfair? First of all, Visa and MasterCard do not inform customers of these interchange fees, they simply set them with the banks behind them and charge retailers and their shoppers accordingly. We believe you have the right to know more about these fees. It is even more unfair for shoppers who do not use the credit or debit cards. That’s because these hidden fees are not charged just to cardholders – that is forbidden the rules of by some card schemes and banks. The high cost of card payments must be passed on across all purchases. This drives up the cost of goods and services for all consumers whether they pay with plastic or cash. This has a serious knock on effect for the wider economy.
  • What’s it about? Whether you use a credit card or not, you pay a hidden fee on virtually every transaction you make. The fees have an inflationary effect and they add up. They cost European shoppers tens of billions of Euros every year.

[Source: Above abstracts from]

Riddle: What’s The Difference Between The Cost To Send An Email And An Electronic Payment? $40 billion each year! (

September 27, 2007

As our company continues to make news for the super-fast photo scanning business we built that is transforming the photo imaging industry and using technology to slash prices for preserving generations of photo snapshots, we wondered why technology has not also led to rock-bottom and tumbled-down interchange fees?

To be more transparent and divulge just how ghoulish this hidden tax is, Visa® and MasterCard® should post the exact interchange fee for each transaction as a separate item on every debit and credit card receipt. We first raised this issue in January, 2006, but they seem too busy figuring out how to go public to distance the banks from our alleged antitrust violations. If they would only pause from what we assert is their attempt to pass along the liability from this litigation onto the public, and instead, agree to post the exact interchange fees on every receipt, then, all merchants and cardholders would understand why we are so passionate about this issue. There would no longer be a hidden tax, but, rather a very vocal cascade of resistance against the peddlers of these unfair fees.

Why are the merchant interchange fees about 1.7% in the U.S. and as low as zero in other nations? And, as other electronic transactions have been slashed too rock-bottom, why have some of their rates [ex. debit cards] tripled in the past 8-years?

Let us pause for a brief study break and review the historical way of sending [“transmitting”] a traditional letter and the processing of a charge slip. In the previous decade, if you wanted to send a letter, you generally bought stationary, an envelope, postage and drove to the Post Office to mail it; days later it was received. Also about ten years ago, merchants, like us, had to stock up on thick, multi-page, carbon-copy charge card receipts, swipe the payment cards through a manual imprinter, mail it to the processing company on the other coast [Florida]. Then, days later, the transaction – less a substantially lower interchange fee than today – was credited to your bank account. As technology advanced, instead of lowering interchange fees, it has actually leaped ahead.

Today, we all use email, and essentially, it is free. Could you imagine if the two leading credit card associations and its thousands of member banks were also involved with the exploration of the Internet? Using their surreptitious market power and pricing domination, every electronic [email] “letter” would come with a beefed-up fee. But, the actual cost to use the Internet network to transmit an electronic message, must be about the same as the cost to transmit an electronic payment on its network, so why are the banks still granted the potency to exert such immense multi-billion-dollar hidden taxes on merchants, cardholders and our economy?


"Dot-Com" Bust, Sub-Prime Mortgage Collapse, Is Interchange Scheme Next? (

September 23, 2007

Is another multi-billion dollar bubble about to collapse?

Hundreds of years ago, during Holland’s speculative tulip bulb craze that gripped the nation, the laws of economics prevailed and the market for flowers collapsed. During the closing days of the last decade, we again witnessed a market failure from the Internet “” fiasco. This summer, it was the unchecked financial policies that led to our nation’s housing predicament.

Where were the regulators when U.S. President Bush was encourage home ownership? Now, we are saddled with billions of dollars in losses because greed by the financial institutions was elevated above smart planning.

The same thing is again happening with merchant interchange fees.

Due to the banks’ unbridled pricing controls over merchant interchange fees, what use to be cost-based is today a fiefdom for non-stop rate increases that retailers and consumers are unable to control. There are no checks to this madness; Visa®, MasterCard® and its thousands of member banks are today’s new enemies battling its two core customers – retailers and cardholders. At least with the tulip craze in the early 1700s, there was a fragrant aroma, while today’s threatening interchange fees and its electronic payment network is nothing more than a rotten, unfair conspiracy to unlawfully fix prices.

Studying MasterCard and now Visa’s IPO “Risk Factors” says it all and flashes the most serious of warnings as they foreshadow what might just happen: the two leading credit card associations could become “insolvent” [“Interchange fees are often the largest component of the costs that acquirers charge merchants in connection with the acceptance of payment cards,” according to Visa’s SEC filing]

If our class action prevails in this antitrust litigation, the same outcome as with tulip bulbs in Holland, Internet stocks on Wall Street and the housing prices in southern California and other speculative markets might just be a giant foreshadowing of what could happen to this interchange fee debacle.

Today, there is little justification for any interchange fee, let alone upwards of $40 billion dollars each year.

Today’s market power of the general purpose card network is without justification. Just look at other nations, even those less industrialized ones and ask why their interchange fees are so much lower than the 1.7% in the U.S.

And, why again are interchange fees for the very costly check writing and clearing process also zero in the U.S.?


"Paper or Plastic? Retailers Struggle With Fees as Customers Increasingly Use Bank Cards Over Cash" (The Patriot Ledger)

September 22, 2007

The following is a reprint from the Steve Adams reported article in The Patriot Ledger on Saturday, Sept 22, 2007 – The Patriot Ledger


Retailers say they’re the biggest tax you’ve never heard of: They’re transaction fees that credit card companies and banks charge merchants every time a customer swipes a credit or debit card to pay for a purchase.

As dozens of lawsuits challenging the fees grind through the courts and Congress holds off on any action, many mom-and-pop merchants are taking matters into their own hands. Violating the terms of their card agreements, many are requiring minimum purchases – typically $10 – for customers using plastic.

Rockland-based Tedeschi Food Shops has received at least two complaints in recent weeks about franchisees setting minimum purchases, executive vice president Robert Tedeschi Jr. said. The company has notified them that they are violating Tedeschi’s policy.

Still, Tedeschi said he sympathizes with the plight of independent merchants, who lose money every time a customer pays for a small transaction with a card.

‘‘We put a notice out to all franchisees that you can’t do it,’’ Tedeschi said. ‘‘I hate to tell them that, because it’s just killing them.’’

Tedeschi Food Shops typically would make a profit of 2 cents on a $3 gallon of gas, but transaction fees gobble up 9 cents per gallon, causing shops to oftentimes lose money on gasoline sales, Tedeschi said.

As plastic threatens to overtake greenbacks as the predominant form of payment in stores, the stakes are high for merchants, banks and card companies.

A Morgan Stanley report indicated that average transaction fees rose from 1.6 percent of a purchase in 1998 to 1.75 percent in 2004. The report said the dollar volume of fee transactions grew from $9.4 billion to $17.5 billion during that period, through a combination of rising fees and more card transactions. The Merchants’ Payment Coalition, a group of retailers organized to fight the fees, estimates interchange fees hit $30.7 billion in 2005.

Transaction fees consist of three elements. When a customer pays with a debit or credit card, the bank that issued the customer’s card charges the store’s bank a ‘‘merchant discount fee’’ and an ‘‘interchange fee’’ to cover the cost of issuing cards and collecting payments. The merchant’s bank then imposes an additional fee, which is also charged to the merchant.

Credit cards have dozens of fee structures that incorporate factors such as the issuing bank’s fees, whether the customer pays with a credit card, a debit card with signature or a debit card with pin code, and how often the merchant reconciles transactions. Rewards cards typically have higher fees than others.

Regardless of the details, fees can wipe out profit margins and make minor card purchases a losing proposition for merchants.‘‘

If somebody puts a pack of gum on the counter and pays with a credit card, you’re better off if the person just stole it,’’ said Jeff Lenard, spokesman for the Washington-based National Association of Convenience Stores.

According to a survey of its members, convenience stores and gas stations made $4.8 billion in profits in 2006, a figure that was diminished by the $6.6 billion they paid in card fees.‘‘

Essentially the credit card companies made more at the stores than the stores themselves,’’ Lenard said.

The Electronic Payments Coalition, which lobbies on behalf of banks and credit card companies, disputes that fees are inflated and says government regulation would reduce choices for consumers. Executive Director Peter Madigan said the fees reflect investments by banks and credit card companies in technology, enabling millions of transactions to be processed in seconds. Fees are overhead costs for merchants, enabling them to attract business they otherwise wouldn’t get, Madigan said.‘‘

We think it does a lot for the merchant. It brings you in as a customer if you’ve got no money in your pocket,’’ he said.

Critics say Visa and MasterCard enjoy a virtual ‘‘duopoly’’ over electronic payments, enabling them to jack up fees out of proportion to their administrative expenses. The House Judiciary Committee heard testimony in July that the fees violate antitrust laws, and Congress continues to study the issue.‘‘

It’s been a very tight relationship and they have had the ability to do whatever they want with transaction fees,’’ said Pete Bartolik, spokesman for alternative transaction processor Tempo Payments of San Mateo, Calif. ‘‘ The more people use (debit and credit cards), the more prices go up.’’

Madigan said there is ample competition within the industry, with more than 14,000 banks offering debit and credit cards.

Rosetta Jones, vice president of Visa USA, defended interchange fees.‘‘

Visa will continue to protect consumers against some merchants who want to shift their cost of doing business onto consumers by charging a check out fee,’’ Jones said in a prepared statement. ‘‘This approach has already been tried – and according to reports failed – in Australia where check out fees have resulted in increased costs and fewer choices for cardholders.’’

In the meantime, retailers such as CVS and Quincy-based Stop & Shop Supermarket Co. have launched debit cards under their own brands with alternative transaction processors that offer lower fees.

Stop & Shop in 2005 launched a ‘‘PayVantage’’ card that links directly to customers’ checking accounts and also stores their loyalty card information. The transactions are processed by First Data Corp., a Colorado financial services company. After a test-launch at 12 Massachusetts stores, the card is now available at 30 stores.

On Sept. 10, Woonsocket, R.I.-based CVS began test-marketing a loyalty ‘‘rewards payment’’ card at 141 stores in the Indianapolis area. The cards link directly to customers’ checking accounts, cutting Visa and Mastercard out of the loop. It also stores information on purchases typically saved on a CVS ExtraCare card, serving both as a loyalty card and a debit card.

The card is issued by Prospect Heights, Ill.-based HSBC Finance Corp., which is trying to set up loyalty debit card programs with other retailers.

Tempo Payments was founded in 2000 to offer merchants an alternate card processing system. The company charges retailers a flat 15-cent fee per transaction, said Bartolik, its spokesman.

Issued by individual retailers under their brand name, the cards are accepted at 200,000 retail locations nationwide including such chains as Best Buy, Circuit City, Marshalls, T.J. Maxx and Talbots. Customers’ cards can be used not only at the retailer that issued the card, but any other retailer that accepts Tempo.

Boca Raton, Fla.-based National Payment Card has launched its own ‘‘decoupled’’ debit cards that link directly to customers’ checking accounts and is targeting gas stations as retail partners. The company says it can reduce merchants’ transaction fees by more than 80 percent.

Retailers, in turn, typically offer three-cent-per-gallon discounts on gasoline to encourage customers to sign up for the service.

In the 21 states that embed magnetic strips on the back of driver’s licenses, customers can enter their license information on a Web site and swipe the license at stations as a form of payment.

NPC processes the transactions through the Automated Clearing House, a network commonly used for direct deposits and automatic withdrawals from bank accounts.

The company counts several hundred gas stations in southern states as customers, CEO Joe Randazza said. He predicts explosive growth because of merchants’ concerns over fees.‘‘

This is the second-largest expense to a gas merchant (after the cost of fuel),’’ he said.

[source: Copyright 2007, The Patriot Ledger]

Where Are The Pro-Interchange Fee Blogs? (

September 21, 2007

Like in baseball, it is easy to keep score, just look at the scoreboard. In politics, there are polls. For interchange fees, there is little other than those regular notices of fee increases.

As retailers continue battling against the two leading credit card associations and its member banks, it is also easy to keep score.

With nearly 800 postings on – The Credit Card Interchange Report, we have yet to profile a single pro-interchange fee blog. Not one. Well, there is always that “pro consumer,” “pro competition” group that enjoys the financial support of Visa, but that really shouldn’t count.

Where are the merchants championing 1.7% interchange fee rates, and challenging Where are U.S. retailers thanking Visa® and MasterCard® for charging among the highest rates in the world, while abroad, the interchange fees are 0.7%, 0.5% and even 0.0% – there are no interchange fee for debit PIN-based cards in Canada.

The reason for such silence?

Merchants understand they are being taken on a ride when cardholders present their affinity frequent flyer cards. The merchants, and thus the consumers are paying for these perks and the nearly $40 billion a year in interchange fees.

Since we were the first to launch the merchant interchange litigation back in mid-2005, there have been no pro-interchange fee blogs that we are familiar with. That speaks volumes about our cause and the unfair fees.

*** Stay tuned for our regular news and commentary updates on Visa over the next several months as it attempts to follow MasterCard and try to distance its member banks’ liabilities.


"Mastercard Paid Lobbyist $280,000" (via AP)

September 21, 2007