More Scheming by Visa and MasterCard

August 16, 2009

About three months ago, I bought new tires and was pleased to learn that it included a $50 rebate. But, the hoops to redeem that incentive were challenging.

Here is what happened:

Rather than receive a $50 check (which would have no interchange fee), a Visa-branded credit card was mailed and JUST received.  The credit card issuers have created a giant windfall scheme for themselves at the expense of consumers.

The rules for redeeming the card is extensive and means that if there is a micro-balance, they keep it. I did a previous posting on this situation.

Premier Shopping Mall Agrees with

All About the Visa and MasterCard Promotional Gift Card Scheme


To access the funds on the electronic payment card you MUST present the card to the service station attendant inside when you fill up. Don’t try to insert it into the gas station pumps’ electronic card reader. It won’t work.  Another rule is: “Please note. Ask the attendant to swipe the card after you have filled up to assure the success of your transaction.” Yeah, right!  Try doing that, as clerks must swipe the card to reserve payment up front.

For regular checkouts, “you must always select ‘Credit’ when making purchases. You are authorized to make purchases that do not exceed your available balance.” This is a pure SCAM. Who makes an exact $50 purchase?  Try using the “gift” card at a restaurant. Imagine being on a date, presenting the card and having the server explain that you can’t! Either way, the merchant is charged the much higher credit card interchange fee, rather than the debit card flat rate.  If it was a check that we deposited into our bank account, there would be no fees and we easily would have the entire gift valued, rather than these games which reduces the value.

My guess is many consumers get frustrated and use part of the balance and dispose or file away the card and thus the issuer gets to keep the balance.  What happens to the company that tendered the rebate “gift card?  Did they pay full price to the card issuer, or a discount?  I can only imagine the amount never redeemed.

Another scheme and pure profit center for the credit card issuers.

Rebuttal to MasterCard Canada Assertions

April 22, 2009

According to Canada NewsWire, MasterCard provided the following key points regarding interchange and debit and replied below.

MASTERCARD CANADA: Canada has a well-functioning payments system that provides significant convenience and security to consumers and merchants. It has continued to operate effectively and drive commerce despite a global credit crisis. More than $240 billion in Canadian commerce is expedited on credit card systems annually.

WAYTOOHIGH: Nobody denies that payment cards are convenient and relatively secure. However, these benefits have nothing to do with interchange fees and do not confer upon issuing banks a blank check to extort supracompetitive profits from merchants and consumers through a hidden tax. Price-fixing is illegal!

MASTERCARD CANADA: A merchant that processes a credit card transaction enjoys guaranteed payment even at a time of increasing consumer default rates.

WAYTOOHIGH: Merchants are not permitted by the Visa and MasterCard rules to separately negotiate for payment guarantee services. This should be a negotiable service subject to competitive forces. Merchants should have the choice of whether to purchase these services from the card networks, from a third party, or not at all. The card networks and issuing banks already include the risk of default in the interest rates they charge to consumers. There is no justification for forcing merchants to cover this cost.

MASTERCARD CANADA: Merchants benefit from increased sales, improved payment efficiency, reduced cash handling, customer convenience and satisfaction, e-commerce facilitation, international purchase handling, automatic currency conversion and settlement, among other benefits.

WAYTOOHIGH: There are no studies supporting the assertion that card usage increases sales, reduces checkout time, or increases consumer satisfaction. These are simple advertising puffery. To the extent that some of these claims are accurate, they are neither an excuse to price-fix supracompetitiveinterchange fees nor a justifiable expense to force upon merchants without negotiation. Just look at the tricks MasterCard and Visa (both were controlled by thousands of the same member banks) They offer sweepstakes, but the less expensive PIN-based debit cards are ineligible. They charge merchants for the high-costing affinity (frequent flier reward) signature cards, but many consumers never cash in those rewards. And now, the credit card companies are taking back the accrued rewards if a cardholder defaults by a single day, some unscrupulous companies are even paying cardholders to close their accounts, thus also losing those rewards.

MASTERCARD CANADA: Interchange is a fee that passes between acquirers (who handle card processing for merchants) and card issuers. Issuers receive interchange to compensate them for significant costs and risks borne in offering credit cards including interest-free periods, account management, credit losses, fraud protection and processing.

WAYTOOHIGH: Regarding the assertion that merchants don’t pay interchange, the rebuttal is that the merchant discount rate automatically includes the interchange fee. The rest is mere semantics. Also, why would they talk about benefits to merchants from interchange fees if merchants weren’t paying those fees? Remember: interchange fees were designed forty-years ago, when retailers used antiquated manual credit card imprinters ( used these way back in the early 1990’s.  The fee was cost-based; remember those stacks of carbon-copy receipts? Write a check, which passes through the Federal Reserve network and the there is no clearing (interchange) charge. Use a Starbucks gift card, and there is no interchange fee. Use a shopping mall card, good at multiple merchant locations, and there is no interchange charge. Buy a gift card for any retailer at a supermarket and even though there is a network of payment mechanisms in place, there is no interchange fee. Use a PIN-based Debit card in Canada and there is no interchange fee. Use a credit card in Iceland and… you get the idea. As to the “issuer compensation” argument, many of those expenses should be borne by the consumer, not the merchant (e.g. free funding period). Furthermore, the merchant should not be forced to purchase these alleged services as a price-fixed bundle. These should be available separately and negotiably.

MASTERCARD CANADA: MasterCard’s Canadian interchange rates remain well below those of other developed markets including the United States and below similar fees for American Express in Canada. A sampling of other countries with higher blended interchange rates than Canada include Argentina, Brazil, Germany, Greece, Indonesia, Japan, Philippines, Poland, Portugal, Switzerland, Turkey and Uruguay.

WAYTOOHIGH: The relevant comparison is not Canada v. Uruguay, it’s competitive v. anticompetitive. The fact that MasterCard’s supracompetitive interchange rates are not quite as inflated in other countries as they are in North America doesn’t render them legal. MasterCard and Visa boast 80% market power and are two giant cartels with, until recently, the same representatives on their board of directors. Collusion, greed, illegal price-fixing and hundreds of billions of dollars paid by consumers and merchants over the years is why this battle may be the largest antitrust case in U.S. history, and why the banks are engaged in a death-spiral battle against its two core customers – consumers and merchants. 

MASTERCARD CANADA: MasterCard receives no revenue from interchange.

WAYTOOHIGH: MasterCard remains a puppet of the issuing banks, who receive enormous amounts of revenue from interchange. How does MasterCard explain the term “Merchant Discount Rate?” So, where do their revenues come from, then?

MASTERCARD CANADA: Consumers do not pay interchange fees nor merchant fees.

WAYTOOHIGH: As with the argument that merchants don’t pay interchange, MasterCard exalts form over substance. As a practical matter, merchants must build in their overhead costs into the costs of their products. Increasing interchange fees effectively increases the cost of goods just as would increasing the cost of the merchant’s rent or electricity.  The nearly $60 billion dollars in merchant interchange fees in the U.S. last year came from somewhere!  It is a hidden tax that ultimately, the consumers pay.

MASTERCARD CANADA: Merchants who choose to accept credit cards pay to participate in exchange for the benefits received. The fee accounts for the multiple benefits received.

WAYTOOHIGH: The idea that merchants “choose” to accept credit cards is a myth. In reality, merchants must accept payment cards in order to stay in business. Furthermore, interchange is not cost-based. If it were, it would be far, far lower. Look at the European Union, where cross-border interchange is mandated to be cost based by law. For Ecommerce businesses, like and millions of other online companies we are forced to accept Visa and MasterCard – they have an 80% market power over the industry. Their millions of dollars invested in TV commercials training consumers not to pay with cash is all the more reason why MasterCard and Visa are like drug dealers, they get consumers trained and then force them to use their products. Yes, force, and we can explain why.

MASTERCARD CANADA: Merchants pay a merchant fee established by their acquirer, not MasterCard. Interchange forms a portion, but not all, of that merchant fee.

WAYTOOHIGH: Interchange accounts for the vast majority of the merchant discount fee and is non-negotiable. The merchant discount fee is always higher than the interchange fee, meaning that merchants effectively pay interchange. If the truth were otherwise, we’d have acquirer lawsuits against the networks and the issuers. Get real, it’s all about MasterCard. Until recently, MasterCard and Visa were just brands (trade associations) fully owned by the banks. Whether the fees go to the banks or the two giant credit card association, the same pockets were being enriched.

MASTERCARD CANADA: MasterCard’s 2008 adjustment to interchange rates was the first in seven years. Some rates were reduced.

WAYTOOHIGH: Whether or not that’s true, it doesn’t change the fact that the rates are much higher than they would be in a competitive environment (assuming they’d exist at all). Some rates were 300% higher than in 1999. Without warning, millions of merchants receive a twice yearly letter explaining the new rates, just days prior to it taking effect.

MASTERCARD CANADA: A merchant can obtain his MasterCard interchange rates via This information has been available for more than two years. [There is a now similar website in the U.S. with more than one-hundred pages of rate schedules].

WAYTOOHIGH: Only two years? Why was MasterCard so secretive before that? Regardless, the merchant has no way of knowing what the interchange rate will be at the time of sale and therefore cannot make an educated decision about whether to accept the card. There is no transparency, and those website rate schedules are unclear and confusing. If MasterCard was honest, they would easily post the exact interchange fee as part of every charge card receipt (right under the sales tax breakdown).

MASTERCARD CANADA: When interchange was regulated in Australia, it led to reduced card benefits to consumers and there is no evidence that retailers passed on savings in reduced prices.

WAYTOOHIGH: To allege that a reduction in overhead costs for an entire country’s merchants would not result in lower prices is to allege a price-fixing conspiracy among all merchants. If so-called “cardholder benefits” were only available because of a price-fixing conspiracy between issuing banks, we should not lose sleep over the disappearance of those benefits when the conspiracy is busted up. The rule of law is what matters, not cardholder benefits.

MASTERCARD CANADA: MasterCard Worldwide has a PIN-based debit payment solution – Maestro(R) – used by more than 652 million cardholders in over 100 countries.

WAYTOOHIGH: Perhaps, but that doesn’t justify the price-fixing conspiracy and it doesn’t justify forcing merchants to pay supracompetitive interchange fees. MasterCard and its issuers don’t get a blank check just because they provide some benefits. Banks would need to provide debit cards even if they didn’t get interchange fees. Otherwise, it would be like banks providing a checking account but no checks.

MASTERCARD CANADA: MasterCard Canada is preparing to expand its global debit processing system in Canada where it would deliver compelling benefits to Canadian consumers and merchants.

WAYTOOHIGH: MasterCard is only increasing its market power so that it can continue to force supracompetitive interchange fees on merchants.

MASTERCARD CANADA: Using Maestro, Canadian consumers could use debit all over the world.

WAYTOOHIGH: See previous two arguments.

MASTERCARD CANADA: Accepting Maestro means Canadian merchants could accept international travelers’ debit cards.

WAYTOOHIGH: See above.

MASTERCARD CANADA: MasterCard will provide technological advancements including greater security and fraud protections, innovations

WAYTOOHIGH: See above.

MASTERCARD CANADA: MasterCard operates a global debit infrastructure with centralized operations that run 24/7. The system delivers significantly greater scale than Canada’s incumbent debit network. It has had zero downtime in more than seven years.

WAYTOOHIGH: See above.

MASTERCARD CANADA: MasterCard will create competition in the Canadian debit market where it has never existed.

WAYTOOHIGH: MasterCard is not talking about competition for merchant acceptance, only “competition” for issuing banks, which has the effect of increasing interchange rates at the expense of merchants. Payment cards are a two-sided market (issuance and acceptance) and when MasterCard, Visa and the member banks talk about so-called “competition,” they’re never talking about the merchant side of the market.

Why Credit Card Companies Full of Hot Air

April 13, 2009


A leading argument to sustain soaring merchant interchange credit card fees is to cover the cost of affinity reward programs.  The banks were passing along the frequent flyer reward costs to merchants, and thus consumers, who are the ones buying the merchandise.

Now that millions of cardholders are losing their accounts, those rewards are being terminated as well.  When a cardholder is delinquent on their credit card bills by even a day, they risk losing all their accumulated reward points as well.

Well, what is it?  If interchange fees are lowered, Visa and MasterCard’s argument is that consumers will have to pay higher fees. As it is, the banks are already raising rates, closing accounts and changing the terms with wanton disregard for their customers.

MasterCard Contest Slams PIN-Based & International Transactions

October 6, 2008

Over the years, we have reported on many MasterCard and Visa sweepstakes that promote huge rewards with tiny odds of benefiting, but preclude PIN-Based and International transactions from participating in automatic entry.  This is the latest gimmick. The odds of winning are so fractional as it stands, so why is MasterCard being so unfair? They want cardholders to force merchants to process their debit cards at the much higher percent of sale credit card rate. 

Read the official MasterCard rules.

MasterCard contact: “You could win $1,000 a Month for the Next Ten Years”  [Just don’t use your debit card to entry!  Read more.

The Really Price-less MasterCard Holiday Promotion Debit Card Holder’s Can’t Enter

Fact: Visa USA Continues Its Legacy of Discriminating Against Its Cardholders

MasterCard’s Most Disingenuous Ad Campaign Yet?

MasterCard Worldwide® Sweepstakes More Like “Cheap”-stakes (commentary
Your PIN-based Cards Are Not Always Welcomed

MasterCard Worldwide® Sweepstakes Scheme Impacts Merchants (

“Retailers Welcome Antitrust Legislation Addressing $40 Billion in Hidden Credit Card Fees” (Via NRF News Release)

March 6, 2008

[Via Businesswire, March 6, 2008]

WASHINGTON–The National Retail Federation today welcomed the introduction of landmark antitrust legislation that would address hidden MasterCard and Visa fees that cost merchants and their customers more than $40 billion a year.

This legislation would use the nations antitrust laws to rein in the greed of the credit card companies, NRF Senior Vice President Mallory Duncan said. With the rapidly increasing use of plastic, credit card companies and their banks are seeing a windfall that is costing U.S. consumers tens of billions of dollars each year. These are fees that most consumers dont even know theyre paying because Visa, MasterCard have tried to keep them secret. The introduction of this legislation marks the beginning of the end of credit card company rip-offs.

Rather than allowing these fees to continue to be set in secret and imposed on a take it or leave it basis, this legislation would require negotiations and allow retailers to seek fair terms and conditions that will ultimately mean a better deal for consumers, Duncan said. Consumers are already angry at the way theyve been treated by credit card companies, and this bill is an important step toward making credit card companies treat both merchants and their customers with respect.

The Credit Card Fair Fee Act was introduced today by House Judiciary Committee Chairman John Conyers, D-Mich. The bill is the first attempt by Congress to address credit card interchange fees, and is the outcome of a hearing held in July 2007 where Duncan, testifying on behalf of NRF and the Merchants Payments Coalition, argued that interchange practices violate federal antitrust law.

Averaging close to 2 percent, interchange is a fee Visa and MasterCard banks charge merchants every time a credit card or signature debit card is used to pay for a transaction. Visa and MasterCard collected an estimated $42 billion in interchange fees in 2007, an increase of 17 percent over the previous year and 150 percent since 2001.

Interchange is largely unknown to most consumers because Visa and MasterCard dont disclose the fee on monthly statements and effectively keep merchants from disclosing it on receipts. But Visa and MasterCard effectively require merchants to pass the fees on to consumers by requiring them to be included in the advertised price of items and making cash discounts difficult. The fees amount to about $350 per household each year.

The Conyers bill would require credit card systems possessing substantial market power to negotiate with merchants to reach a voluntary agreement on credit card terms and conditions. If an agreement cannot be reached, both sides would be required to submit to binding arbitration by a three-judge panel appointed by the Department of Justice and Federal Trade Commission.

The arbitration proceedings would take place with a limited 60-day discovery period and other statutory deadlines, and the judges would be required to apply a market standard reflecting a perfectly competitive system where neither side had market power. Terms and conditions set by the panel would be in effect for three years, at which time the process would repeat itself. Both sides would receive limited immunity from antitrust laws in order to participate in the process.

The legislation requires that terms and conditions set under the process be available to any merchant regardless of size, industry or location. Individual merchants or groups of merchants would remain free to negotiate voluntary arrangements with credit card companies and their banks.

NRF is leading retailers fight against soaring interchange costs. During last summers testimony before the Judiciary Committees Antitrust Task Force, Duncan explained to lawmakers how Visa and its member banks come together to set interchange rates that all banks agree to charge regardless of which banks name is on a card. MasterCard follows a different procedure that also results in all its banks agreeing to charge the same. In either case, the two card associations each operate as illegal price-fixing cartels in violation of antitrust law, he said. With Visa and MasterCard together controlling at more than 80 percent of credit card purchase volume, retailers cannot afford to refuse the cards, he said.

The National Retail Federation is the world’s largest retail trade association, with membership that comprises all retail formats and channels of distribution including department, specialty, discount, catalog, Internet, independent stores, chain restaurants, drug stores and grocery stores as well as the industry’s key trading partners of retail goods and services. NRF represents an industry with more than 1.6 million U.S. retail companies, more than 25 million employees – about one in five American workers – and 2007 sales of $4.5 trillion. As the industry umbrella group, NRF also represents over 100 state, national and international retail associations.