Small Business Advocates Commend California Investigative Hearing on Credit Card Fees (NACS)

January 27, 2010

Hearing provided a critical opportunity to address the impact of hidden swipe fees and review possible solutions.

SACRAMENTO – Monday afternoon, California Assemblyman Pedro Nava, chair of the Assembly Banking and Finance Committee, held an investigative hearing on the impact of hidden credit card swipe fees on California consumers and small businesses. Californians paid nearly $5 billion in swipe fees in 2008.

Small-business owners and advocates know that these hidden fees — which total more than credit card annual fees, cash advance fees, over-the-limit fees, and late fees combined – are crippling Main Street businesses and hurting their customers at a time when they can least afford it.

This hearing provided a critical opportunity to address the impact of hidden swipe fees and review possible solutions. The hearing is particularly notable both because of the size and impact of the California economy in the United States and because Visa’s headquarters are located in the state.

“This hearing is important, because it shows that Assemblyman Nava is listening to his constituents and that he recognizes, at a time when the economy is already so bad, that we can’t afford to let Visa, MasterCard, and the big banks rake in billions of dollars in hidden fees on the backs of small businesses and consumers,” said Mitch Goldstone, president and CEO of, an Irvine, Calif.-based retail and online business that feels the impact of ever-increasing swipe fees every day.

“It’s also important that it’s happening in California. First, because we have such a large economy on our own, and reforms that start here often get picked up across the country. And second, because Visa is headquartered in California, this represents a dramatic signal to them that lawmakers are joining small businesses and our customers in saying ‘enough is enough,’” said Goldstone in a press release.

“Reforms are needed to create a transparent process for businesses to negotiate rates and enhance public awareness of interchange fees, which continue to increase,” testified Liz Garner of the Food Marketing Institute the hearing.

“Card companies and banks collect an interchange fee averaging about 2 percent on every credit and debit card transaction, and can raise the rates at any time by any amount,” she said. “We are working for a more competitive and transparent card system that works better for consumers and merchants alike, and hearings like this one are a critical step in that process.”

Credit card interchange fees squeezed American consumers and businesses to the tune of $48 billion in 2008. These hidden fees are set in secret by the banks and credit card companies and charged to store owners every time they run a customer’s credit card.

Americans pay the highest swipe fee rates in the industrialized world. On average, two dollars of every $100 a consumer spends using a credit card goes directly to the credit card industry. That adds up to $427 a year for every American household. Since 2001, the amount Americans pay in swipe fees has tripled.

source: NACSOnline 

CNN reports on “swipe fees”; merchant says Washington should stand up to banks

January 26, 2010

CNN national political correspondent Jessica Yellin filed a report on Saturday on Your Bottom Line, hosted by Gerri Willis, examining credit-card interchange fees, “a hidden cost store owners say is crippling business.”

 Estimates show that in 2008 banks collected $38 billion to $46 billion in swipe fees alone, and some in Congress say that’s way too much and a sign that too few banks control the credit-card business, said the report.

Here is a transcript of the report:

Gerri Willis, host of CNN’s Your Bottom Line: While consumers are outraged about sky-high credit-card fees, businesses across the country are feeling the crunch, too. CNN national political correspondent Jessica Yellin joins us now to break down interchange fees.

Yellin: Gerri, I didn’t know these fees existed until I reported this story. Banks make money every time you or I use a credit card. They charge merchants a fee just for accepting the card and, no surprise, businesses pass that cost on to you and me.

According to the National Retail Federation, in 2008 the average household spent $427 on these interchange fees alone. And some in Congress are finding it hard to change that.

Yellin: It’s a hidden cost store owners say is crippling business; it’s called a swipe fee. Each time a customer uses a Visa or MasterCard, business owners like Keith Lipert have to pay a fee and that’s passed on to consumers. [This item costs] $125?

Keith Lipert, Gallery Owner: That’s $125. So the interchange on $125 would be about $2.

Yellin: The fee can be as much as 3% of your purchase, and it adds up. Lipert says swipe fees cost him as much as rent and health care.

Lipert: As a shopkeeper, I’m getting a service or a convenience for the credit-card companies, and that is fair. My objection is that I’m not allowed to negotiate.

Yellin: Credit-card companies say it’s the cost of processing transactions. What are they really getting for that fee? What’s the service that’s being provided?

Trish Wexler, Electronic Payments Coalition: So they’ll get almost instant payment and guaranteed payment for it. Whereas my card issuer, I won’t pay them for another 30 days, so there’s the float on the funds, which is a big component.

Yellin: Estimates show that in 2008 banks collected $38 billion to $46 billion in swipe fees alone. Some in Congress say that’s way too much and a sign that too few banks control the credit-card business.

Rep. Peter Welch (D-Vt.): What we’ve seen, really, is that the financial services industry is starting to make its money not so much by providing reasonable service, but by manipulating price by having a lot of hidden fees, by having a lot of extra transaction costs in running up their profits by doing that in taking advantage of monopoly power.

Yellin: Several bills before Congress would reduce these rates by allowing businesses to negotiate with card companies, but don’t expect those bills to pass any time soon. The industry, which is spending big on lobbyists, insists lowering swipe fees would end up costing consumers in other ways.

Wexler: If interchange rates are forced down below what is sustainable for a card program, then rates are going to have to go up or rewards are going to have to go away. Those are the facts.

Yellin: But Lipert says that Washington should stand up to the banks.

Lipert: We need, as a country, to address this.

Yellin: Now, there’s another reform some in Congress are pushing for now—they want to let retailers charge a lower price if you pay cash. And in a different slightly higher you use your credit card. That way at least only credit-card users are paying these swipe fees, but Gerri, no surprise, so far banks and credit-card companies are fighting that reform, too.

Willis: All right, so obviously we’re seeing yet another fee being passed on to us through retailers. But, what can you do as a consumer?

Yellin: There are two things you can do. If you have to use your credit card, use your debit card, the swipe fee on that is lower than actually using a credit card. And the other is, if you choose a card that doesn’t have as many rewards on it, the swipe fee is lower, the banks are actually charging you for those rewards with that swipe fee.

Willis: All right, and you can always pay cash, there’s always cash. What other reforms might happen?

Yellin: Well, they’re talking about, first of all, disclosing these fees, so that you know what you’re paying. They’re talking about also reducing the cost of…fixing the cost of rewards charges so that you know what you’re paying on rewards cards and they can’t charge you more for that.

But here’s the really important one. There’s a discussion of allowing the Federal Trade Commission to determine if these practices are anti-competitive. That’s because these big banks are getting all together and deciding what the swipe fees should be and some say that’s colluding, that’s monopoly and it should change.

Via CSP Magazine

Banks suspend interchange fee for Haiti donations

January 18, 2010

A California businessman has led a successful fight to prevent credit card companies from profiting on donations made to Haitian earthquake disaster relief.

Mitch Goldstone, owner of, is among the U.S. business owners who have fought transaction fees collected by credit card companies.

Click here to read more


Banking, credit card cartel so intoxicated by greed that their advocacy lobbyists just issued this…

October 7, 2009

Electronic Payments Coalition, the group funded by Visa Inc.,  MasterCard Worldwide and the major banks and credit card issuers (payment card networks and financial services companies) just issued this press release. Click here.

We disagree with it, including this key point:  The problem with cash discounts is that they don’t allow for different prices depending on the type of payment card used.  There are about one-hundred separate merchant interchange fees and it is nearly impossible to know what the cost is for each transaction. In other words, they prevent Visa and MasterCard from competing over the cost of acceptance. The same principle applies to the honor-all-cards rules, which prevent merchants from exercising a preference for lower-cost cards, thereby preventing competitive forces from placing downward pressure on interchange fees. Not to mention the condescending, patronizing attitude that credit card companies know better than merchants how to treat a merchant’s customers.



PRNewswire release

Merchants Can Already Discount for Cash, But Don’t – So What Would H.R. 2382 Really Do?

Electronic Payments Coalition Unveils the Truth About Rep. Peter Welch’s Interchange Bill

WASHINGTON, Oct. 7 /PRNewswire/ — In advance of the October 8th hearing in the House Financial Services Committee on H.R. 2382, “The Credit Card Interchange Fees Act,” sponsored by Rep. Peter Welch (D-VT), the Electronic Payments Coalition has issued the following statement:

“H.R. 2382 is one of the most egregious assaults on consumer protection that this country has seen in some time. Disguised as a measure to allow for cash discounts – something that is already allowed by federal law and by all card network contracts – the bill would instead open up the door for bait-and-switch advertising schemes, charging additional checkout fees at the register, and discrimination against certain card holders. The bill is chock full of provisions that mean one thing: consumers will pay more so merchants can pay less. Bottom line – retailers don’t want to pay their fair share for a service that brings them more sales and higher profits – and want their customers to pick up the tab instead.”

The Electronic Payments Coalition released today a document detailing the anti-consumer protection measures detailed in H.R. 2382. This document follows this statement.

Rep. Peter Welch’s H.R. 2382 – “The Credit Card Interchange Fees Act” – would…

Leave consumers vulnerable and unprotected against deceptive, bait-and-switch advertising.

Rep. Welch’s legislation would eliminate important consumer protections on how merchants are allowed to advertise their prices – restrictions that are in place expressly to protect consumers. This would allow retailers to promise one low price, then charge more – potentially a lot more – when the customer reaches the cash register. Consumers would be left unprotected, forced to pay the demanded price regardless of what was advertised – and retailers would profit unjustly from their dishonest schemes.

Leave consumers stranded at the checkout counter.

Imagine getting to the front of a long line at the grocery store, only to discover that the store doesn’t accept your alma mater’s credit card. Or they won’t accept the card that donates a few cents of every purchase to your favorite charity. This legislation allows merchants to pick and choose which cards they will accept – and which cards they won’t – with no advance warning to their customers.

Dramatically reduce – or eliminate – the card rewards programs that are used by 80% of American households.

H.R. 2382 would prohibit a slightly higher interchange rate for rewards cards – cards that are traditionally used by customers who are proven to spend more when they shop, in turn providing greater value to merchants. Unfortunately, merchants don’t want to pay for this benefit – and the result would be far fewer rewards for American consumers who value such programs. In fact, similar regulation in Australia has resulted in a 23% reduction in the value of rewards programs for consumers.”

Force businesses to disclose highly confidential financial information to the public and to their competitors.

H.R. 2382 would require every contract, rate agreement, and rule on merchant discount rates to be submitted to the Federal Reserve, which would then be responsible for publishing every bit of it. This would involve literally millions of documents, most containing highly sensitive financial information. The chaos that would result from the sheer volume of contracts – not to mention the compromised financial information – would be incredibly harmful to retailers and to financial institutions.

Falsely characterize interchange as a consumer fee, by requiring that it be disclosed on consumer statements.

It’s simple: consumers don’t pay for the cost of card acceptance. It’s a cost of doing business for merchants that accept cards. Despite this clear distinction, H.R. 2382 would force card issuers to print the amount of interchange, as well as the total amount various merchants paid for each charge – an amount that varies depending on what each merchant negotiated – on consumer’s credit or debit card statements. This is nonsensical, unrealistic, and would ultimately confuse consumers and the financial decisions they make.

About Electronic Payments Coalition

The Electronic Payments Coalition (EPC) includes credit unions, banks, and payment card networks that move electronic payments quickly and securely between millions of merchants and millions of consumers across the globe. EPC’s goal is to protect the value, innovation, convenience and competition in today’s growing electronic payments system. EPC educates policymakers, consumers, and the media on the system’s role economic growth, and the importance of protecting consumer choice and stability for the continued growth of global commerce.

SOURCE Electronic Payments Coalition

What Is “Interchange” [video: Electronic Payments Coalition]

September 20, 2009

You just have to watch this how-to video. The key facts about illegal antitrust price-fixing are omitted, as are the reasons why merchant interchange fees in the U.S. are upwards of six-times what other industrialized nations pay. Remember, this video and the organization promoting it is funded by the banks and Visa and MasterCard. 

The problem is that few understand what these fees are; it is a hidden tax on consumers – amounting to upwards of $48 billion in anticompetitive charges each year. As proof, since this video was posted, only about 450 people viewed it, which my guess was largely from those who produced it.

“Swipe Fee” Reform – International Lessons (via

September 18, 2009

Click here to read the recent report profiling interchange merchant interchange fees rates.  U.S. credit card interchange fees ~2X rates in UK, New Zealand.  ~4X rates in Australia. ~6X cross border MasterCard rates in the EU






[Source:, Merchants Payments Coalition]

“Not only do other nations provide lower interchange rates, but we can also learn from other countries’ experiences with interchange reform. Major countries around the world have addressed interchange reform, with some already demonstrating beneficial results for their economies. In particular, lessons learned from experiences in Australia, New Zealand, Canada, and the European Union, provide instructive examples about why interchange reform makes economic sense in the U.S. – especially now.”


Consumers Petition for Lower Credit Card Swipe

August 22, 2009