“Read This Before You Swipe! Debit Card Dangers” (MSNBC)

February 13, 2008

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Fees: Banks prefer the credit option when you use your debit card, because they make more money in fees. For a $200 transaction, for example, a bank could make $1.99 if the customer chooses the “credit” option and signs his or her name. This is more than three times the 60 cents they usually make from customers who choose “debit” and enter a PIN number.”

Click here to view article by Sloan Barnett, MSNBC

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“Peer Review: Merchants Pay Fees for Sales That Use Plastic” (StarTribune.com)

January 24, 2008

Thanks to the Star Tribune (Jan 24) and their article on debit vs. credit cards.  According to the paper (and we agree), “[y]ou have heard correctly: Merchants pay fees when you use your plastic for purchases. Those charges are called “interchange fees,” although there may be some fees with other names built in as well. The system is fairly complicated, but the fact is that if you spend $100 using plastic when shopping, the merchant likely will see only $98 or $99 of it. Credit-card and debit signature transactions typically cost merchants between 1 percent and 2 percent of the purchase amount in fees, depending on the type of card and the banks involved.”

Click here to view the entire article.


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

January 23, 2008

Through Visa USA, most of the same thousands of member banks which collectively owned MasterCard and Visa are again tricking cardholders (for those not reading the very fine, tiny print).  This time, Visa USA is taunting millions of cardholders with a less than slim chance of getting  a golden ticket to the Olympic Games in China [Visa  is again a worldwide Beijing 2008 Olympic partner].

According to the promotion, “8 symbolizes good fortune in China,” it also symbolizes another reason why interchange fees are unfair.  Why exactly does Visa USA discriminate against its PIN-based and ATM cardholders anyway?

Just as with previous MasterCard sweepstakes, this time according to newspaper print ads (LA Times, Jan 23, A6), “8 fans will be on their way to the Olympic Games from Visa.”

Although no purchase is necessary, the millions of PIN-based and ATM cardholders better plan on tuning in on television, rather than watching from the Beijing stadiums.  Use of those cards are “not eligible.”

See this Visa USA link to read it in their own words.  The world’s largest credit card association describes this “exciting promotion” as a way to build “customer loyalty,” but at who’s expense?

While MasterCard and Visa promote PIN-based and ATM card use, they are encouraging cardholders to force merchants to process each electronic payment transaction at the much higher credit card interchange rates.  When you think of the chances of winning, the restriction is rather petty.  But, that is not the point.  The real game is to again train cardholders to demand that merchants swipe their card at much higher rates.  What consumers don’t understand is that they too are being taken on a ride because ultimately the $40 billion annual interchange charges are paid by them through higher costs. 

Background – Summary of Prior Related Articles

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

MasterCard Worldwide® Sweepstakes More Like “Cheap”-stakes (commentary WayTooHigh.com)

Your PIN-based Cards Are Not Always Welcomed (Commentary, WayTooHigh.com)

The Wild Ride Continues: An Interchangeable Menu of Payment Card Schemes (Commentary: WayTooHigh.com)

MasterCard Worldwide® Sweepstakes Scheme Impacts Merchants (WayTooHigh.com)

  

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


“Credit or Debit? It Depends Upon Whom You Ask” (The Patriot-News)

January 13, 2008

Reporter Sharon Smith, from The Patriot-News, has a comprehensive article in the Sunday, Jan 13th edition about the difference between debit and credit cards. She mentions the contests and games banks (Visa and MasterCard) play to entice cardholders to use their debit cards as signature credit cards, so retailers are forced to pay more.  What is missing is the explanation that ultimately consumers end up paying more, as someone has to cover the higher signature-based interchange fee. More to the point, the larger question is why is there such a significant spread between the two services? 

We have dozens of previous commentaries on this scheme and how it impacts retailers and consumers. 

[Click here to view the article]


Interchange Fees: From $40,000,000,000 to Zero

November 30, 2007

One of the disruptive forces in electronic payments are micropayments.  It helps draw attention to the argument that interchange fees are now obsolete.  What currently represents a $40 billion hidden tax on retailers and consumers is destined to implode due to technology, and hopefully, our merchant interchange antitrust complaint against Visa, MasterCard and its leading member banks.

As we assert, while the defendants were conspiring to illegally fix prices by agreement and create anti-competitive practices, they lost hold of technology.  Today, nearly everything is faster.  Look at the payment network and its low-value electronic financial transactions’ micropayments – which represent charges from a few cents to a dollar or two.  Whether it is paying for a parking meter, McDonald’s meal or a newspaper from its newsstand rack, you can find more places today to charge for small transactions.

While the actual cost to transact an electronic payment is tiny, Visa and MasterCard think that using their 80% market power and payment network should enable them to have variable fees.  If they are able to effectively connect the issuing and acquiring banks and process the payment for a Big Mac for pennies, how can its member banks justify a $40 billion annual interchange merchant tax that is no longer cost based?

Even our company has a fixed rate for our newest technology, super-fast photo scanning. Whether you order just one or one-thousand analog pictures to be digitized, ScanMyPhotos.com charges a flat-fee of just $49.95 [and that includes our interchange payments too].  Point is that the new, super-fast photo scanning service we created involves about the same level of work to scan one or one-thousand pictures, and that is the question to Visa and MasterCard.  If the incremental network cost to process an electronic payment to buy a newspaper or a Rolex watch is about the same, other than illegal price-fixing, how can the financial institutions and credit card associations justify their fee structure?