Now that an average 18-wheeler gas fill-up costs about $1,200, next time you see a truck take notice that they are helping to fund Visa, MasterCard and its member banks cardholder reward schemes. As trucking industry drivers use plastic to pay for topping off their tanks, about $25.00 merchant interchange fees are immediately funneled to the card associations and their member banks. When you review technological advancementsand the laws of efficiency, just how much of that $25.00 help support the electronic payment network? According to published reports, the cost to process an electronic transaction is about 13 percent – That means that the cost is about $3.25 from the standard 18-wheeler truck fill-up, while $21.75 (87%) helps explain why the merchant interchange fees are broken and unfair.
Click here to read the May 14th ConsumerAffairs.com article by Martin Bosworth. Reprinted below.
Retailers, bankers gear up for discussion of ‘Fair Fee Act’
By Martin Bosworth, May 14, ConsumerAffairs.com
The House Judiciary Committee has scheduled hearings on legislation that would rein in credit card interchange fees tomorrow. The hearing will be preceded by a frenzy of lobbying as retailers square off against the financial industry over the hidden fees that retailers pay to process credit card transactions.
The hearing will discuss the “Credit Card Fair Fee Act of 2008,”introduced in March by Judiciary Committee chairman John Conyers (D-MI). The proposed legislation would require lenders and credit card companies to negotiate with retailers on terms for interchange fees, and for the Federal Trade Commission and the Justice Department to step in and arbitrate if an agreement could not be reached.
Currently, interchange fees are set by credit card companies such as Visa and Mastercard, and the payments are often high enough to wipe out a store’s profit on any sold item, forcing them to raise prices for all customers just to recoup their losses. A coalition of retailers banded together to sue both companies and many major banks for what they claim was collusion in setting interchange fee profits
Photo store [and ScanMyPhotos.com co-]owner Mitch Goldstone, one of the lead advocates of eliminating interchange fees, said that “We are ready to explain why interchange fees are obsolete, illegal and anti-competitive.” In a posting on his blog, WayTooHigh.Com, Goldstone said that “After years of toil, merchants and consumers are at the cusp of forcing the demise of these unbridled and unnecessary interchange fees on American’s and our neighbors around the world.”
Both the retailer litigation and threats of proposed new regulations have conspired to bring together credit unions and national banks–traditionally old foes–to oppose the legislation. The Hill reported that both sides plan to bombard Capitol Hill with advertising urging Congress to oppose legislation restricting interchange fees.
Retailers and interchange fee opponents hope to take advantage of the zeitgeist surrounding credit card, as several members of both the House and Senate have introduced new legislation that would curb the most abusive practices of the industry, and have held multiple hearings decrying the more unscrupulous tactics of the financial industry against its customers.
Even with continuing healthy profits for both credit card companies and highly successful IPOs, both Visa and Mastercard are rumored to fear a “perfect storm” combining the elimination of the interchange fees, lower card usage and higher delinquencies due to the economic climate, and restriction of many of the fees levied on consumers.
Industry analysts have observed that one of the principal motives for both Visa and Mastercard to go public was to build up “war chests” for funds to recover losses if the interchange fee litigation should go against them–and to shift the bulk of the risk to shareholders and investors.
Look at it this way: Visa and MasterCard’s member banks’ interchange fees last year were much greater than three-times Microsoft’s entire net income of $14.8 billion dollars last year. The total interchange fees charged to merchants and paid by consumers last year were greater than the combined net earnings of Chevron ($17.5 billion), Hewlett-Packard ($7.2), Intel ($6.2), Walt Disney ($4.6), Apple ($3.4), Lockheed Martin ($3.0) McDonald’s ($2.3), Federal Express ($2.0) and Walgreen ($2.0). [source: Forbes 400].
“Just like the British in 1773, Visa and MasterCard Won’t Negotiate. Enough is Enough (Via UnfairCreditCardFees.com)May 13, 2008
- Just like the British in 1773, Visa and MasterCard won’t negotiate. Enough is enough. View “Tea Party Ad” print advertisement
- Credit card companies trap merchants and consumers with high fees. Don’t take the bait! View “Card Trap Ad” print advertisement
- Americans pay 3 times as much in credit card interchange fees as Europeans. View “Screw Ad” print advertisement
- Ever wonder who pays for all that credit card junk mail? You do. It comes from your credit card interchange fees. View “Junk Mail Ad” print advertisement
- It’s the credit card sucker punch consumers never see coming. View “Boxer Ad” print advertisement
[source: Unfair Credit Card Fees.com]
WayTooHigh.com – The Credit Card Interchange Report Comments:
Let us not forgot that interchange fees were designed decades ago to cover the cost of a four-party electronic payment network – back when we used manual credit card imprinters and mailed in thick bundles of carbon copy credit card receipts to clear the payments. Back then, it took days to transfer funds, today it is instant and efficient.
This is the “perfect storm.”
The House Antitrust and Competition Policy Task Force holds a hearing on the Credit Card Fair Fee Act of 2008 to ensure competitive market-based rates and terms for merchants’ access to electronic payment systems. Thursday 05/15/2008 – 11:00 AM; 2141 Rayburn House Office Building, Judiciary Committee Antitrust Task Force.
Visa and MasterCard profiting from a devastating natural disaster?
This is another image crisis for the two leading credit card associations and their thousands of member banks. When the public understands that with each electronic payment donation to help the people affected by the Asian cyclone, Visa and Mastercard are doing more than clearing the charges. They are reaping profits from a global tragedy. There should be additional pressure placed on their continued profiteering – this time at the expense of vital aid needed for that region of the world, ratherthan to help fund the banks’ other fiscal missteps.
If you thought that Visa, MasterCard and thousands of banks were heartless by reaping windfall profits during our economic energy crisis and record fuel prices, just wait. Even more dismaying than forcing credit and debit card holders to pay upwards of $2.50 for merchant interchange fees when they pay at the pump, is the current Asian disaster.
The United Nations estimates 1.5 million people have been “severely affected” by the May 2nd cyclone that swept through Myanmar. The death toll in that Cyclone-ravaged region could hit hundreds of thousands of people. What are Visa and MasterCard doing? As far as we know, every time an electronic payment donation is sent to The American Red Cross and other relief efforts, the two leading credit card associations and their thousands of member banks make a profit. The interchange fee, which could be upwards of 2.0% from each donation is being delivered to financial institutions, rather than in direct aid to the people in need.
Even worse is that the American Red Cross is in violation of their credit card merchant agreement and is risking disqualification from Visa and MasterCard because nation’s premier emergency response organization demands a minimum electronic payment of $5.00. Click here to read how they explain the merchant interchange fee issue.
Will Visa and MasterCard waive its interchange fees for American Red Cross and other related transactions?
As the pressure grows for Citigroup Inc’s new CEO, Vikram Pandit to address the troubled bank’s missteps, I wonder whether he has the influence to make the call to Visa and MasterCard on behalf of all the card associations’ member banks?
“Tragedy of Dead and Survivors in Myanmar Grows Worse” (via Aung Hla Tun reporting for Reuters)