“The Credit-Card Fee Market Isn’t Working” (via WSJ)

April 8, 2008

Click here to read the April 8th Wall Street Journal “Letter to the editor” from Rep. John Conyers (D., Mich.), Chairman House Judiciary Committee and Rep. Chris Cannon (R., Utah), Ranking Member House Judiciary Subcommittee on Commercial and Administrative Law.


In the Journal’s March 29 editorial, “Credit-Card Wars,” you note that, “as consumers we’d like to see interchange fees come down too, but through market innovation and competition, not Congressional fiat.” We agree. That’s why we introduced the bipartisan Credit Card Fair Fee Act: It facilitates direct negotiations between merchants and the credit card industry on interchange fees.

This approach is necessary because of concerns about coordinated price fixing among issuers leading to less competition and higher rates. For example, Visa has increased the average interchange rate 17% (26 basis points) in recent years despite dramatically improved processing technology and rapidly rising card volume. As the Journal notes, “Economies of scale should be driving [interchange] fees down, as in most other service-fee industries.”

In fact, Americans pay nearly three times as much on average as Europeans in credit-card interchange fees for the same set of services — nearly 2% of every retail purchase. This amounts to nearly $36 billion imposed on consumers through higher retail prices. And the interchange fee is the largest credit-card fee of all — dwarfing credit-card late fees, over-the-limit fees, balance transfer fees, annual fees, inactivity fees, penalty interest fees, and even ATM bank fees.

Yet the editorial says the market will ride to the rescue and bring down excessive credit-card interchange fees. That is unlikely unless there are negotiations and proceedings as set forth in our legislation. In an economy in which, as the Journal notes, credit transactions are now king and cash has been dethroned, how can the vast majority of merchants turn down plastic from the two major credit-card companies, who control approximately 80% of the market?

We introduced the Credit Card Fair Fee Act to create an open and transparent environment that doesn’t exist today, one that will not only spur the major credit-card companies to negotiate fairly on interchange but also to provide the opening for lower-cost interchange credit-card brands. Our bill would lead to competitive market-based interchange rates and terms.

Rep. John Conyers (D., Mich.)
House Judiciary Committee

Rep. Chris Cannon (R., Utah)
Ranking Member
House Judiciary Subcommittee on Commercial and Administrative Law

Riddle: What do Newspapers, Photographic Film and Interchange Fees Have in Common?

February 7, 2008

If you are a regular reader of WayTooHigh.com, you already know the answer to what do newspapers, photographic film and interchange fees have in common? 

During last week’s International Photo Marketing Association convention, one speaker explained that mainstream media has been devastated by technological changes, where the Internet and social networking groups are quickly replacing the need for print editions of newspapers.  He explained that “newspapers don’t have the ability to adapt” and that “newspapers aren’t dying, it’s aging readership is.”  They explained that electronic storage is the greatest example of deflation; hardware that one costs in the millions is today just a few hundred or less dollars. 

 Technology has also impacted other industries, like the photographic film industry, which we personally know about.  Our volume of film developing has disappeared due to the advent of digital imaging. today, our entire business is digital.

 And, another segment that should have experienced similar changes is the electronic payment industry. Retailers once using manual credit card imprinters are mostly swiping cards super-fast and super-efficiently.  Today, the cost for an electronic transaction is a fractional amount from when the four-party payment system had to manually clear each charge. Yet, our interchange fees have experience a degree of inflation that can only be caused when a cartel is in charge of pricing.


 Want to know more about lead plaintiff ScanMyPhotos.com?  Click here and read their daily blog: Tales from the World of Photo Scanning

Thanks Reuters, We Too think Visa’s IPO is in Question

January 25, 2008

Welcome to our growing number of daily readers around the globe. 

While our company’s blog site [Tales from the World of Photo Scanning] enjoys readership around the country, WayooHigh.com with its nearly three-years of news and commentary updates on Visa, MasterCard and its member banks’ schemes is read internationally.

Today’s Reuters story on Visa’s IPO follows our WayTooHigh.com posting after the European market crash earlier this week.  We too think the Visa IPO may be in question. 

Following the presentation to the International Consumer Electronics Show on Jan 8th, next week in Las Vegas, for the International Photo Marketing Association, we again will be addressing a major industry. This time, talking on topics about innovation and public relations.  We will again look forward to hearing more stories from people also impacted by the credit card cartel’s market power as they too are forced to fund the banks’ other fiscal misadventures. 

The photo industry intemiately understands how technology and innovations has helped to lower costs and boost savings, while the credit card associations still maintain nearly 100 separate fees which should, effectively cost just pennies per transaction, but instead grab a share of each total charge for most credit card transactions.

Another Reason Why The Banks Interchange Fee Should Be Zero

January 21, 2008


The National Association of Convenience Stores magazine (July 2005) reported that “interchange fees arguably are meant to cover the technology cost of account processing and the risk taken by the issuing bank that the credit will not be repaid. It is no secret that technology costs continue to fall while processing power increases dramatically.”

The previous posting addresses the risk factor, this column focuses on technology.

As well-known entrepreneurs, Mitch Goldstone and Carl Berman, lead plaintiffs in the antitrust litigation against Visa, MasterCard and member banks also co-edit The Credit Card Interchange Report – WayTooHigh.com. This column provides a real-life experience to understand why Visa and MasterCard may be forced to disband its merchant interchange charges.

The nationally recognized business leaders operate an online boutique photo service (30minphotos.com) which recently created an entirely new business model for preserving generations of photos.  The company previously charged $5.00 to produce one high-resolution digital scan from a single photo; the process would take several minutes. Today, their ScanMyPhotos.com service scans 150 photos of any size — from wallets to 11×17 enlargements in just one minute. The charge is $49.95 for 1,000 photos; an entire shoe box of pictures is scanned within minutes and mailed back the same day for under 5-cents per print.  They even launched “15-Minute Photo Scanning, or it’s free. see link.

This same math applies to the credit card associations. With technology advancing at lighting-fast speed, each few months yields entirely new cost-saving techniques, yet for banking card transactions the fees keep rising?

Just one decade ago when merchants used bulky non-electronic credit card imprinters, the multi-page carbon forms cost a great deal and had to be mailed for processing. This took several days and incurred costly clearing and processing fees, which was why the interchange fees were initially established; it was cost-based.

Today, just as how the cost for digitally preserving photos was cut by Goldstone and Berman from $5 to 5-cents, so too have the costs for banks to process merchant payments. Yet, the latter service continues to face huge, unjustified fee increases.

Visa and MasterCard can learn a great deal from their customers like Goldstone and Berman. Many business services and products share similar cost-savings to lower rates while enhancing the benefits.

[source: WayTooHigh.com]

If Writing Checks is Free and Processing Checks is Free, Shouldn’t There Also be No Interchange Fee Too?

January 21, 2008

Have you ever seen those advertisements for banks’ free checking offers?

Several offer check writing with no monthly maintenance fees or charges to bank at ATM’s, online and by phone. With no minimum requirement, Bank of America, for example, offers free online banking with free bill paying and a free Bank of America Visa® Check Card with Total Security Protection® and Photo Security® . The website explains that it is all free.

When you write a check, there is zero interchange fee, there is no charge to the consumer or retailer who accepts the check, yet we all know how costly and the amount of labor required to process and clear checks.Citibank even offers free checking with direct deposit and your first order of checks are free too.There is even no charge for Citibank ATM transactions and no charge on non-Citibank ATM transactions. The bank provides programs for unlimited free check writing.

How about all these free perks from Wachovia Bank, N.A. and its no-strings attached free checking. It looks like everything is free. The bank has “re-invented its personal free checking account to better meet consumer needs. Extra Free Checking requires no minimum balance, has no monthly service fee, and unlike many banks’ free checking accounts, does not require direct deposit. It also comes with the Visa Extras debit rewards program and Free Online BillPay.” Some of the features of the Wachovia “extra free checking account” include: no minimum balance, no monthly service fee, unlimited check writing, no direct deposit required…, free online banking and online BillPay, free check card with Visa Extras rewards program, unlimited visits to Wachovia financial centers, Wachovia’s automated phone service, Wachovia ATMs, plus access to SouthTrust ATMs to get cash or check balances with no fees.

Bank One Net Checking® provides no fees for transactions, withdrawals, bill payments or balance inquiries, unlimited check-writing, convenient use of ATM, Direct Deposit or Bank-by-mail, make withdrawals at Bank One® Money Access Center® ATMs for no fee, unlimited transactions with no fee for withdrawals and balance inquiries at Bank One® Money Access Center® ATMs, by phone or when you make purchases with The One® Business Card SM and you can use its direct deposit and bank-by-mail services with no transaction fees.

The point is that there are no “points,” no fees, no charges, no costs, nothing. Yet, credit card transactions face supracompetitive interchange fees which are a hidden tax on consumers.

(commentary: WayTooHigh.com)

Background on credit card interchange collective price fixing antitrust litigation

January 21, 2008

Interchange fees were originally regulated, audited and designed to pay for the cost of transferring money from buyers to sellers. It was designed to balance the cost of transferring money, quickly, efficiently and at a low cost. But, in reality the rates only rise. There is no economic justification for these anti-competitive fees. This is a mature network that is highly inefficient and is a hidden tax that is affecting millions of businesses and consumers. The Interchange rates have increased 85% since 1998. There was no Interchange fee prior to the 1990’s and no fee for PIN debit cards; think of the ATM machines – initially there was no transaction fee, just like with writing checks. Electronic transactions inherently should cost less just because it?s automatic and more efficient.Mitch Goldstone and Carl Berman, founders of “WayTooHigh.com” operate The Credit Card Interchange Blog to provide an informational tool with regular updates. WayTooHigh.com suggests that the friction between banks vs. Merchants / consumers is about to explode; the credit card associations operate in an anti-competitive market power over merchants. Price fixing is illegal and most merchants have little ability to negotiate with Visa and MasterCard for lower interchange fees.

Did you know that the card-issuing banks that control Visa and MasterCard have the ability to raise interchange fees as high as they want and there is no market force that restrains then from doing so? As merchants and consumers begin to understand and learn about these interchange fees, they too will be better informed.



 Want to know more about lead plaintiff ScanMyPhotos.com?  Click here and read their daily blog: Tales from the World of Photo Scanning