Premier Shopping Mall Agrees with WayTooHigh.com

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 ScanMyPhotos.com [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 WayTooHigh.com 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

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”?]

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

Visa and MasterCard are promoting their prepaid gift cards. MasterCard promotes this as “perfect for friends and family.”  It’s even more perfect for them and its member banks.

Why?

If you are like us, we recently used a prepaid credit card, but ran into trouble when the balance remaining entered single digits.  Not even Starbucks would accept the card, the message explained that the card was not valid. Think of the discomfort when you have only a few dollars remaining on your gift card. What do you do? The card associations and member banks hope that you just discard the plastic gift card, and then, guess who makes even more money, in addition to the merchant interchange fee billed when the gift card was purchased with plastic to begin with.

From the MasterCard website they offer the below advice, but, for us, the sales clerk was unable to handle this transaction and just passed back the card. Even MasterCard acknowledges that not all merchants can handle that transaction, and thus the open balance ends up back in the member bank and the card associations pockets.  MasterCard promotes that their cards are “more flexible than retail gift cards” which put them in a precarious position of competing with their core customer – the merchants, and fails to explain that retail gift cards can easily be drawn down to a zero balance.

What happens if I need to return an item I purchased using my MasterCard gift or other prepaid card?  “Yes, you can still use your MasterCard prepaid card. Just tell the cashier in advance how much to deduct from your prepaid card and how much you will pay using an alternate payment method such as your Debit MasterCard card. Note that this process, known as split tender, may not be supported by all merchants.

“Bah-Humbug!

[Commentary: WayTooHigh.com]

Even More Hidden Credit Card Fees

We’re pausing for a moment from our mission to invalidate the merchant interchange fees to identify yet another windfall for Visa and MasterCard.   Have you seen those Visa and MasterCard gift cards that you can purchase?

The first round of hidden fees is when you charge those “gift” cards to your credit or debit card.  As you swipe your card, the merchant is charged one of the nearly one-hundred interchange fees, which could be as high as 3-5 percent of the transaction.

The next charge is one what we just experienced.  A friend presented us with a $25.00 charge card gift.  After several uses, there was about a $2.00 balance, but when we presented the card at Starbucks, the Barista explained that the card was not accepted.  That was an uncomfortable moment, but one that generated this question: what happens to the millions of dollars in change that is accumulated on this gift cards?  What do you do when the balance is too low for ordinary redemptions?  When consumers discard the cards with a few cents or a few dollars remaining, the card associations and issuing banks make even more windfall profits.

Just how much money each yet is never cashing in from those gift cards and add that to the total cost of each electronic payment transaction.

[Commentary: WayTooHigh.com]

   

No Interchange Fee on Gift Cards

Especially during the holiday season speedily encroaching, more retailers are expected to promote their own electronic payment gift cards. Billions will be spend by consumers to purchase plastic gift cards that are unassociated with the electronic payment network.

In parallel to the two leading credit card associations, these cards share many of the same transaction and production costs, yet they are without interchange fees. Just like when writing a check, or using a debit PIN card in Canada, gift cards also abolished traditional interchange fees. 

The retailers understand the value of the cards without imposing those hidden fees that MasterCard and Visa demand.  But, if the card associations challenge our view by explaining that the fees are not hidden – they do post the fees on their website. We challenge them to find a large group of merchants who ever visited those pages and can easily understand the more than one-hundred pages of fees and schedules.

For our business, when a consumer wants a box of 1,000 photos scanned to a DVD, we charge $49.95. Period. ScanMyPhotos.com does not have a hundred page fee schedules. We cannot, after all – we are not controlled by thousands of banks and we do not illegally fix our prices by agreement with others.

Visa® and MasterCard® might argue that their member banks are part of a four-party system, with issuers, acquirers, cardholders and retailers all involved with each transaction. A retailer offering gift cards limit the activities and also much of the expense. However, when Citigroup, JPMorgan Chase and Bank of America, for example, are both the acquirer and issuer, they are getting paid more.  Even realtors selling homes who are on both ends of a residential property sale adjust their fees downward, when they represent both parties.

While gift cards are without interchange fees, the banks are reaping extraordinary windfall profits from an antiquated payment system and because most consumers and merchants are entirely unaware that this is a $30 billion dollar annual scheme which Visa and MasterCard designed, control and are fighting to protect.  And, worst yet. How do most consumers pay for those interchange-free gift cards?  That’s right: with Visa and MasterCard, so the banks garner more windfall profits, even as retailers do not.

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

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.  

[Commentary: WayTooHigh.com]