Premier Shopping Mall Agrees with

August 19, 2008

I have long advocated against and drawn attention to the unscrupulous and anti-business practices of Visa and MasterCard’s electronic gift cards.  The cards raise questions about the hidden interchange fees forced upon unsuspecting merchants and consumers who do not understand that those “convenient” payment solutions come with a hefty price tag; retailers are forced to pay interchange feeswhen those cards are used; many shoppers loose out when micro-balances remain on the cards.  Even retailer-generated gift cards come with costly baggage; many times the small balances are simply not redeemed because it is to hard to cash in a few dollars that remain on the card and to pay the exact amount remaining.

Just down the road from [a division of 30 Minute Photos Etc – lead plaintiff in the merchant interchange antitrust price-fixing litigation] and home to our Irvine, California-based headquarters is the famed South Coast Plaza.  According to Wikipedia, “South Coast Plaza is an upscale shopping mall, and one of the most notable shopping centers in the United States. In 2004, Women’s Wear Daily reported that the mall had the highest sales per square foot of any mall in California, at about $800. It is also the third biggest mall in the United States.”  South Coast Plaza has disbanded its electronic gift cards for paper certificates.

As reported by Orange County Register reporter, Hang Nguyen on August 19,

South Coast Plaza recently switched from its mall gift cards to gift certificates.  The decision was driven by shoppers and retailers who preferred the “ease of gift certificates and were frustrated by the limitations of the gift-card program,” which launched less than two years ago, the Costa Mesa mall said in a statement.  If shoppers wanted to pay their purchases with both cash and a gift card, they had to know the exact amount on the card. To get that info, they went online, slid the card through one of about 30 readers at the mall or called a number on the card. However, the retailer was not able to tell them their card balance.  And if the retailer punched the wrong amount for the card twice, the shopper might have been locked out from using the card for 5 to 7 business days.  With certificates, the dollar amount is on the paper.  Also with cards, after one year, a $2-per-month fee was applied to unused balances. This fee was charged by American Express, a South Coast Plaza spokeswoman said. The mall said it did not have control over this charge, which is common from third-party issuers.  Because gift-certificate processing and management is done in-house, South Coast Plaza can choose to not charge shoppers a fee. It considers its no fee for certificates as part of the mall’s customer service.  Also with gift cards, it would take five to seven business days for the customers to see the return issued on the card, unless they returned the merchandise the same day.  Funds are immediately available after returns of purchases made with gift certificates.  If a shopper does not use the entire certificate amount, the retailer can give up to $20 cash back or a store credit. Or the customer can go to the concierge desk to have the certificate broken down into smaller amounts.  “While it may seem like a surprising decision, we discovered that high-tech options don’t always translate to better customer service,” Debra Gunn Downing, the mall’s executive director of marketing, said in a statement.  Shoppers can convert gift cards into gift certificates at any concierge location. All existing gift cards will continue to be honored.” 

Visa and MasterCard branded gift cards are even worse and come with added concerns as identified by several prior postings.  Now, a leading shopping centre has caught on and switched back to paper certificates.

All About the Visa and MasterCard Promotional Gift Card Scheme

Visa and MasterCard Branded Gift Cards Force Unjust Penalty on Consumers

Visa and MasterCard Gift Cards: Almost as Profitable as Interchange Fees

Visa and MasterCard Gift Cards, Part II


All About the Visa and MasterCard Promotional Gift Card Scheme

June 24, 2008

I recently bought a new AT&T wireless cell phone and received a $50 rebate, but not so fast. The refund was not a standard check, but rather as an electronic payment AT&T branded Visa Promotional Card. The challenge was to find merchants which accepted the card. I tried at the gas pump, I tried at an Albertsons Supermarket. It seemed I had better luck at Starbucks.

If you thought the merchant interchange fees to Visa and MasterCard and its member banks were high and not transparent, these electronic “gift” cards are unfair and spawn another blemish on the credit card payment network. Unlike with cashing a check, each time the card is used, merchants are forced to pay interchange fees on each transaction.

The costs are staggering (about $50 billion each year) and then there is another hidden cost. The card I received was for $50.00, but as the value was used up, I now have a balance of about $1.60. What can I buy for exactly $1.60. These micro balances are then difficult to redeem, yielding the two giant card associations, its member banks and companies promoting them with extra, hidden windfall profits at the expense of consumers.

Because these are not “credit cards” how it is processed and accepted differs from merchant to merchant. In the case of the AT&T Visa Promotional Card, it clearly is branded as a “debit” card, yet the detailed accompanying instructions included this important information:

  • “When shopping, simply tell the cashier to process your card as a ‘credit’ transaction, not a ‘debit’ card.” [Editors note: this means that retailers are forced to pay a percent of each sale rather than a low flat-rate debit card rate].
  • “To purchase gas, have the service station attendant process the transaction inside. Use your AT&T Promotional Card to make purchases anywhere Visa debit cards are accepted.” [Editors note, just do not use it as a “debit” card warns the informational page that was mailed with the card].
  • Purchases can be made without usage fees or finance charges…… [Editors note: does that mean there are no merchant interchange fees for these transactions? From reading the instructions it explains there are no “usage fees”?]

Oil Jumps to Nearly $100, Generates More Interchange Fee Profiteering

November 21, 2007

With crude oil prices topping $99.29 a barrel, Visa and MasterCard’s member banks are reaping extra rich rewards this holiday season. Few motorists understand that a percent of most credit card transactions paid at the pumps goes to the acquiring and issuing member banks of the card associations’ electronic payment network.  As the global economy faces this economic energy crisis, the banks are reaping windfall profits. Why exactly are they able to charge a percent of each transaction, when the cost to clear an electronic payment is just about 13% of the total interchange fee cost?

But, there are more questions to also be asking this Thanksgiving holiday.

At supermarkets and other stores, you will find a variety of retailer gift cards.  Guess which ones include an “activation fee?”  That is right Visa, but not any of the restaurants, book stores or other merchants.  Why are the card associations able to charge an additional activation fee anyway?  The privilege of using their network, rather than dealing directly with merchants, like Starbucks generates even more fees for them.