The Taiwanese animation studio is covering America’s the next big scandal: The Kardashian Kard. This is a ridiculously expensive prepaid credit card for 13-year-old children. And now they are plugging their very own MasterCard… and charging us $99.95 for the “privilege” of using one.
Excerpt via Bill Hardekopf, CEO of LowCards.com:
Last week, the Kardashian sisters launched a new credit card targeted at teens, one of the worst products to enter the financial market in a long time.
The card is very expensive and using the Kardashians as financial role models to impressionable teenagers is already being questioned by financial experts around the country.
The card is a prepaid MasterCard debit card with the Kardashian sisters’ picture on the plastic and is done in partnership with Mobile Resource Card, providers of custom prepaid card programs. The card is promoted as a way for parents to monitor their children’s spending while teaching them money management skills.
But the cost of the card for the first year is $99.95 which includes a one-time card purchase of $9.95, 12 months of monthly fees at $7.95 per month, and preloaded deposit of $5.00. After the first year, a $7.95 monthly fee will be assessed. If consumers prefer a six month option, the cost is $59.95.
The fees do not stop after the card is purchased. ATM withdrawals cost $1.50 in addition to ATM fees. Automatic bill pay using the card costs $2 per item. There is a 2.5% fee for instant transfers that are made from a credit card or debit card. If you want to add money to the card, tack on an additional $1. It will cost you $6 to close the account. Have a question on the card? That will be $1.50 to speak with a live operator.
The below glossory of terms were extracted from the May 23, 2008 second consolidated amended class action complaint re Payment Card Interchange Fee and Merchant-Discount Antitrust Litigation, filed in the U.S. District Court Eastern District of New York. These definitions of key terms associated with the antitrust litigation are helpful, especially if any defense attorneys or advocacy groups are unfamiliar with interchange issues.
DEFINITIONS as used in this Complaint, the following terms are defined as:
a. “Access Device” means any device, including but not limited to a Payment Card or microchip, that may be used by a consumer to initiate a General Purpose Card or Debit Card transaction.
b. “Acquiring Bank” means a member of Visa and/or MasterCard that acquires payment transactions from merchants and acts as a liaison between the merchant, the Issuing Bank, and the Payment-Card Network to assist in processing the payment transaction. Visa and MasterCard rules require that an acquiring Bank be a party to every merchant contract. In a typical payment transaction, when a customer presents a Visa or MasterCard card for payment, the merchant relays the transaction information to the Acquiring Bank. The Acquiring Bank then contacts the Issuing Bank via the network for authorization based on available credit or funds. Acquiring Banks compete with each other for the right to acquire payment transactions from merchants but do not compete on the basis of the interchange fee, which is the subject of this Complaint.
c. “All-Outlets Rule” is a rule of the Visa and MasterCard Networks that requires a merchant with multiple outlets to accept Visa or MasterCard, respectively, in all of its outlets, even if those outlets are owned by a separate corporate entity, operated under a different brand name, or employ a different business model.
d. “Anti-Steering Restraints” are the rules of the Visa and MasterCard Networks that forbid merchants from incenting consumers to use less expensive payment forms, including: the No-Surcharge Rule; the No-Minimum-Purchase Rule; and the Networks’ so-called “antidiscrimination rules,” which prohibit merchants from treating any other Payment Card or medium more advantageously than the Defendants’cards. The Defendants’ standard-form-merchant agreements proscribe steering by preventing merchants from establishing procedures that favor, discourage, or discriminate against the use of any particular Card.
e. “Assessment” refers to an amount computed and charged by the Networks on each transaction amount to the Acquiring and Issuing Banks.
f. “Authorization” is the process by which a merchant determines whether a cardholder is authorized by his or her Issuing Bank to make a particular transaction. The merchant sends the cardholder’s information to its Acquiring Bank or a Third-Party Processor, which sends it to Visa or MasterCard, which then sends it to the issuer or the issuer’s processor, to obtain authorization. If authorization is given, the process is repeated in reverse.
g. “Charge Card” or “Travel & Entertainment Card” (T&E) is an access device, usually a Payment Card, enabling the holder to purchase goods and services on credit to be paid on behalf of the holder by the issuer of such device. Typically, the contractual terms of such cards require that payment from the holder to the issuer be made in full each month, for all payments made on behalf of the cardholder by the issuer during the preceding month. The issuer does not extend credit to the holder beyond the date of the monthly statement, nor does it impose interest charges on the balance due except as a penalty for late payment. Examples of Charge Cards are the American Express Green, Gold, Platinum, and Centurion cards as well as the Diners Club and Carte Blanche cards issued by Citibank.
h. “Credit Card” is an access device, usually a Payment Card, enabling the holder to (i) effect transactions on credit for goods and services purchased, which are paid on behalf of the holder by the issuer of such devices; or (ii) obtain cash with credit extended by the issuer. Credit Cards permit consumers to borrow the money for a retail purchase from the card issuer and to repay the debt over time, according to the provisions of a revolving-credit agreement between the cardholder and the issuer. Examples of Credit Cards are the Visa and MasterCard Credit Cards issued by members of the Defendant Bank card networks, as well as the Discover and Private Issue cards issued by Morgan Stanley, Dean Witter & Co., and the Optima and Blue-type cards issued by American Express. Proprietary cards of individual merchants for use only at particular merchants’ outlets are not included in this definition.
i. “Debit Card” is an access device, usually a Payment Card, enabling the holder, among other things, to effect a cash withdrawal from the holder’s depository bank account, either at an Automated Teller Machine (“ATM”) or a point of sale.
j. “Float” refers to the expense the Issuing Bank incurs by extending interest-free credit to the consumer for the grace period between the date of purchase and the date of payment.
k. “General Purpose Cards” collectively refers to Credit Cards and Charge Cards.
l. “Grace Period” refers to the time between a consumer’s purchase and the date on which the consumer’s payment is due to the Issuing Bank, during which time the consumer pays no interest.
m. The “Honor All Cards” Rules are rules of the Visa and MasterCard Networks that require any merchant that accepts Visa or MasterCard Payment Cards to accept all Payment Cards that are issued on that Network.
n. “Interchange Fee” in the United States General Purpose Card Network Services and Debit Card Network Services markets means a fee that merchants pay to the Issuing Bank through the Network and the Acquiring Bank for each retail transaction in which the Issuer’s card is used as a payment device at one of the Acquirer’s merchant accounts. The Interchange Fee is deducted by the Issuing Bank from amounts otherwise owed to Class members on Payment Card transactions, and constitutes a component of and a floor for the Merchant-Discount Fee. The following example illustrates how the Visa and MasterCard Interchange Fees work. A customer presents a Visa or MasterCard card to a merchant as a payment method. The merchant contacts the Acquiring Bank, either directly or through a Third-Party Processor, to authorize the transaction. The Acquiring Bank submits the transaction to the Network. The Network relays the transaction information to the Issuing Bank or the Issuing Bank’s Third-Party Processor, which approves the transaction if the customer has a sufficient line of credit or available funds. If the transaction is authorized through the Network, the Issuing Bank pays the Acquiring Bank the payment amount minus the “Interchange Fee,” which is fixed by the member banks of Visa and MasterCard. The Acquiring Bank then pays the merchant the payment amount minus the Interchange Fee and other charges for processing the transaction. The total fee charged the merchant is often referred to as the “Merchant-Discount Fee.” The Interchange Fee is the largest component of the Merchant-Discount Fee. Visa Interchange Fees are fixed periodically by Visa member banks, acting through the Visa Board of Directors. MasterCard Interchange Fees are fixed periodically by the MasterCard member banks, acting through the MasterCard Board of Directors. “Merchant-Discount Fee” means the the same Third-Party Processor.
p. “Issuing Bank” means a member of Visa and/or MasterCard that issues Visa and/or MasterCard branded Payment Cards to consumers for their use as payment systems and access devices. Issuing Banks compete with each other to issue Visa and MasterCard cards to consumers. Visa and MasterCard rules require that all member banks issue, respectively, Visa and MasterCard Payment Cards.
q. “Merchant-Discount Fee” is the total sum that is deducted from the amount of money a merchant receives in the settlement of Visa and/or MasterCard transactions. The largest component of the Merchant-Discount Fee is the Interchange Fee.
r. “Miscellaneous Exclusionary Restraints” refer collectively to the All-Outlets Rule, the No-Bypass Rule, and the No-Multi-Issuer Rule.
s. “Network Services” means the services and infrastructure that Visa and MasterCard and their members provide to merchants through which payment transactions are conducted, including authorization, clearance, and settlement of transactions, and those similar services offered by American Express and Discover. As they currently are offered by Visa and MasterCard and their member banks, Network Services include Network-Processing Services and the Visa and MasterCard Payment-Card Systems that facilitate acceptance of Visa and MasterCard Payment Cards.
t. “Network-Processing Services” are the services that are or may be used for authorizing, clearing, and settling Visa and MasterCard Credit and Debit Card transactions.
u. “No-Minimum-Purchase Rule” is a rule of the Visa and MasterCard Networks that prohibits merchants from imposing minimum-purchase amounts for Visa and MasterCard Credit-Card purchases.
v. “No-Bypass Rule” is a rule of the Visa and MasterCard Networks that prohibits merchants and member banks from bypassing the Visa or MasterCard system (thereby avoiding the supracompetitive Interchange Fees) in order to clear, authorize, or settle Credit Card transactions even if the Issuing and Acquiring Banks are the same, or even if an independent processor has agreements with both the Issuing and Acquiring Banks on any given transaction.
w. “No-Multi-Issuer Rule” is a rule of the Visa and MasterCard Networks respectively, that prohibits Visa and MasterCard transactions from also being able to be processed over other Networks.
x. “No-Surcharge Rule” is a rule of the Visa and MasterCard Networks that forbids merchants from charging cardholders a surcharge on their Payment-Card transactions to reflect cost differences among various payment methods. For example, merchants are prohibited from surcharging cardholders who use a Visa Credit Card rather than a Discover-branded Credit Card, or use a Premium Credit Card rather than a standard Credit Card, or use a Credit Card rather than another form of payment.
y. “Offline Signature Debit Card” or “Offline Debit Card” is a Debit Card with which the cardholder authorizes a withdrawal from his or her bank account usually by presenting the card at the POS and signing a receipt. Offline Signature Debit Card transactions are processed as Credit Card transactions. Examples of Offline Signature Debit Cards include Visa’s “Visa Check” product and MasterCard’s “Debit MasterCard” product.
z. “Online PIN-Debit Card” or “PIN-Debit Card” is a Debit Card with which the cardholder authorizes a withdrawal from his or her bank account by swiping her card at the POS and entering a Personal Identification Number (“PIN”). PIN-Debit-Card networks grew out of regional ATM networks and are therefore processed differently than Offline transactions. Examples of Online PIN-Debit-Card networks include Interlink, Maestro, NYCE, and Pulse.
aa. A “Premium Card” is a General Purpose Card that carries a higher Interchange Fee than a Standard Card and is required by a network to carry a certain level of rewards or incentives to the cardholder. Visa’s “Signature” and “Traditional Rewards” card products and MasterCard’s “World” card product are examples of Premium Cards.
bb. “On-Us Transactions” are transactions in which the Acquiring Bank and the Issuing Bank are the same. Even when the Issuing and Acquiring Banks are identical, Visa and MasterCard require that the Issuing Bank charge an Interchange Fee to the merchant.
cc. “Payment Card” refers to a plastic card that enables consumers to make purchases from merchants that accept the consumer’s Payment Card. The term “Payment Card” refers to several different types of cards, including, General-Purpose Cards, Debit Cards, Travel & Entertainment Cards, stored-value cards, and merchant-proprietary cards.
dd. Although “Payment Cards” are a subset of “Access Devices”, the two terms are used interchangeably herein, because despite evolving technology, Payment Cards continue to constitute the vast majority of Access Devices.
ee. “Payment-Card-System Services” means the standard-setting functions performed by Payment-Card Networks. Payment-Card-System Services encompasses the brand of the particular card program, the rules and protocols for providing merchant acceptance of and conducting Payment-Card transactions under that brand, and the rules and protocols for conducting transactions under that brand. The four leading providers of Payment-Card-System Services are Visa, MasterCard, Discover, and American Express.
ff. “Payment-Guarantee Services” refers to a service that a merchant might purchase to insure the merchant against Credit- or Debit-Card fraud, check fraud, and other forms of payment fraud, and/or assists the merchant in minimizing the costs of such fraud.
gg. “Settlement” is the process by which the merchant is reimbursed for a Payment Card transaction. While Visa and MasterCard rules require that an Acquiring Bank be a party to all merchant card-acceptance agreements, merchants often use Third-Party Processors to process these transactions. The Acquiring Bank or its processor credits the merchant’s bank account with the amount paid by the cardholder less the Merchant-Discount fee, the largest component of which is the Interchange Fee, and then transmits the transaction data to Visa or MasterCard, which sends it to the Issuing Bank or its Third-Party Processor. The Issuing Bank then sends payment to the Acquiring Bank through Visa or MasterCard (and possibly the Acquirer’s processor). In a Credit Card or Offline Debit Card transaction, settlement occurs two to four days after authorization and clearing. In a PIN-Debit transaction, all three processes occur in the same electronic transaction virtually instantaneously.
hh. “Third-Party Processor” is a firm, other than Visa, MasterCard, a member bank, or an entity affiliated with a member bank, that performs the authorization, clearing, and settlement functions of a Visa or MasterCard Payment-Card transaction on behalf of a merchant or a member bank. Examples of Third-Party Processors include First Data and Transfirst.
WayTooHigh: Q: How can banks (MasterCard / Visa) site “competitive pressures” regarding need for soaring credit card rates? They own the Monopoly board!
WayTooHigh: You know it’s a good day for consumers and retailers when Visa publicly expresses extreme disappointment: http://ow.ly/kdXF
WayTooHigh: Q: Why hasn’t MasterCard, Visa, Chase, CitiGroup, BofA, etc… not been shut down for collusion and credit card price-gouging. A: Dunno
WayTooHigh: More Scheming by Visa and MasterCard. Anatomy of How an Electronic Gift Card “Works:” http://ow.ly/kdWc (new post)
WayTooHigh: MAJOR SCAM: Visa, MasterCard gift cards issued rather than checks. They keep micro-payments remaining, because you can’t exceed your balance
WayTooHigh: @nancytrejos– As credit card companies lower reward benefits merchants interchange fees should be too, WE (consumers) pay those rewards
WayTooHigh: Looking forward to watching NBC’s Meet the Press on Sunday – my hero, Rachel Maddow takes on someone I can’t stand, Dick Armey
WayTooHigh: Rob Reeg. pres Global Technology & Operations for MasterCard Worldwide, frightens consumers http://ow.ly/izsH with misinformation
WayTooHigh: credit card companies cut ad spending 50% (Brandweek) = less risk and lower mkting costs, yet record interchange fees? http://ow.ly/k8UC
WayTooHigh: Why should retailers be taken on a ride when affinity reward credit cards are used? Consumers ultimately pay = NO FREE REWARDS
WayTooHigh: media spending for credit card ads PLUNGED 50% means LOWER interchange change fees as marketing was part of the cost, so why HIGHER fees?
WayTooHigh: As recession-weary consumers are swearing off their credit cards, credit card brands are swearing off advertising http://ow.ly/k8Ua
WayTooHigh: Network Rivalry Sparks 10-Year Quadrupling of PIN-Debit Pricing (via Digital Transactions) http://ow.ly/k8mc
WayTooHigh: only justification [for soaring interchange fees} is when you have an anti-competitive business model and you can illegally fix prices
WayTooHigh: Improved processing technology and the weak economy should be driving card-acceptance prices down http://ow.ly/k8lP (Digital Transactions)
WayTooHigh: RT @Denrael: @WayTooHigh there is competition but challenge is getting wallet space [Not really, MasterCard and Visa wield 80% Market Power]
WayTooHigh: Stop Unfair Credit Card Fees Tell Your Elected Representatives To Act On Interchange Fees http://ow.ly/iEOe
WayTooHigh: FIGHT CREDIT CARD FEES: Write Congress – Share this link with fellow merchants http://ow.ly/iENK
WayTooHigh: Circle K Circulates Petition Chain placing petition protesting credit-card fees in its convenience stores http://ow.ly/iEN1
WayTooHigh: More consumers using debit cards (50.4%) over all noncash sales (AP), but ScanMyPhotos.com and many merchants process it at higher CC rates
WayTooHigh: New to ScanMyPhotos.com: For updates on our antitrust lawsuit against Visa, MasterCard, major banks See: http://ow.ly/k4Wj
WayTooHigh: Had media interview w/ biz pub. Explained credit card companies get away with high rates because they = monopoly, fix-prices, NO competition
WayTooHigh: Credit Card Issuers’ trick: Ads showing “fun” ways to design photos on credit card = distraction, should be URGING you to READ terms #18000
WayTooHigh: Three bills have been introduced in the 111th Congress that address the issue of interchange fees http://ow.ly/jNRA
WayTooHigh: It’s Visa and MasterCard that should thank consumers every time they use a debit / credit card at stores: http://ow.ly/iftW
WayTooHigh: From MasterCard Inc. Q2 Earnings Call, NO explanation about price-fixing and intl interchange fees that are 1/3 that in U.S.
WayTooHigh: NZ Commerce Commission settled out of court w Visa in deal that will change fees charged on all retail transactions in NZ http://ow.ly/jLA1
WayTooHigh: Commerce Commission And Visa Reach Agreement To Settle Credit Card Interchange Fee Proceedings http://ow.ly/jLmA
WayTooHigh: Our economy lost trillions POST Bush’s $300 p/ person stimulus program. But, Republicans silent on anything but attacking current plan.
WayTooHigh: SHAME on Visa, MasterCard, credit card companies for misguided effort to shift message from BANK GREED to chain store profiteering.
WayTooHigh: Congress must support “Credit Card Fair Fee Act,” especially in a recession. Takes ~$60 bln out of banks unfair rev into consumers pockets
WayTooHigh: Visa, MasterCard look abroad for growth (via Reuters) [Even thought U.S. interchange fees ~3x more than abroad?] http://ow.ly/jIw9
WayTooHigh: Stop Unfair Credit Card Fees Tell Your Elected Representatives To Act On Interchange Fees http://ow.ly/iEOa
WayTooHigh: When anticompetitive and illegal interchange fee price fixing ends, family-owned restaurants, dry cleaners, etc. will be SAVED
[source: MasterCard Worldwide press release, June 4]
Purchase, NY, June 04, 2009 – MasterCard said today that legislation introduced today by U.S. Rep. John Conyers (D-MI), by exempting merchants from antitrust laws, would take away the fundamental protections that these laws provide consumers. This would result in less credit availability, along with higher prices and reduced benefits when Americans choose to use their credit or debit cards. Antitrust laws are designed to protect competition and consumers, but this bill would have the opposite effect.
Conyers’ legislation, H.R. 2695, would give merchants a special exemption from antitrust laws enabling them to engage in anticompetitive and collusive behavior when establishing the fees and terms applicable to accepting payment cards. The bill is part of an organized merchant campaign to shift their card acceptance costs to consumers, and does not require merchants to pass on any savings to consumers if they succeed in lowering these fees.
When similar legislation was considered last Congress, it stirred considerable controversy and was only narrowly approved by a deeply divided Judiciary Committee. In addition, a wide array of organizations from non-profits to community banks and credit unions to minority small businesses voiced their opposition. The Department of Justice also expressed concern about the bill indicating that its antitrust exemptions “would appear to be the type of naked collusion that the antitrust laws condemn as per se unlawful because such conduct lacks plausible benefits to competition.”
Experience demonstrates that consumers lose when merchants no longer pay their fair share for the valuable benefits they receive from accepting payment cards. This is precisely what happened in Australia when the government reduced interchange fees. Although it cut costs for merchants, many Australian consumers now pay more for their payment cards and receive less in return as a result of the government’s intervention. Furthermore, there is no evidence that merchants reduced prices for consumers as a result of the government’s intervention.
Both merchants and consumers benefit from the ability to use and accept electronic payments, and in today’s free market system, each pays a share of the cost of the service. The benefits and the cost of card payment services are now shared between merchants and consumers but the merchants behind the Conyers bill seek to retain the benefits while shifting the costs to consumers.
Finally, MasterCard noted that any serious discussion of these issues should wait for the results of the Government Accountability Office (GAO) study ordered by Congress as part of the Credit CARD Act. Consumers stand to be severely damaged by government intervention and the findings of the GAO study may help avoid consumer harm that inevitably flows when merchants no longer pay their fair share for the benefits they receive.
From The Wall Street Journal on Dec 8th, by reporter Lynn Cowan [see link], is an article about executive pay. The executive excesses at MasterCard and Visa could be further signs that the two giant credit card cartels are generating massive revenues from its discount interchange fee and other monopoly-generated charges.
Excerpt:
MasterCard’s final prospectus in May 2006 contained 15 pages describing how much and what types of compensation executives were paid, but wasn’t very specific about how bonuses or incentives were determined, listing 18 possible goals, from stock price to revenue, that could be used.
Two years later, rival Visa’s March 2008 IPO documents contained an executive compensation section that totaled 28 pages, and included how its executives’ pay compared to peer companies; the names of those peers; and what measurements, such as net income, that are used to determine executives’ bonuses.
MasterCard wasn’t spared forever. After the rule took effect, its next proxy statement’s executive-pay section had doubled in size to 30 pages, and contained much of the same level of detail that Visa provided.
For example, instead of listing 18 possible goals, it specified that net income and return on equity targets would be the basis of cash bonuses.
Visa declined to comment.
MasterCard spokesman Chris Monteiro said the disclosure process “certainly took time and effort” but resulted in a “transparent and detailed view” of the company’s compensation structure.
The greedy banks and auto industry execs failed their shareholders and Americans. Their mismanagement is being rewarded with billions, or is it trillions in free money?
Everything has turned upside down.
Accountability is irrelevant and Washington lobbyists are all powerful. Look at today’s Merill Lynch & Co assessment that oil might soon be trading at just $25 a barrel, according to a Bloomberg report. If gas can plunge from nearly $150 to under $50 in just a few weeks, due to the economic seizure, why are the Visa and MasterCard merchant interchange fees – fueled by its member banks – continuing to rise?
During this global financial crisis, even gas prices are plunging. In an earlier WayTooHigh.composting, I quipped that a barrel of gas would more likely fall to $50 than interchange fees be lowered. Interchange fees is the cost that merchants are forced to pay to the banks, and in turn to Visa and MasterCard though a not-very “discount” fee.
Now oil is nearly $80 from its high of about $150, yet the global economy still has record interchange fees. When you operate a collusive, monopoly that is the way things work. I wonder whether the government’s intervention into nationalizing the banking system will speed up more attention to these unfair rates?
As millions of businesses and consumers are impacted by the dismal performance and unbridled greed from the failed banking industry and financial institutions, now is the opportunity and perfect storm to finally demand that the unfair interchange fee scheme be terminated.
The Washington bailout is packed full of pork – with every shade of lipstick on a behemoth pig – The pig is represented by our nation’s banks.
The U.S. Chamber of Commerce and the Business Round Table have seen that Washington pays attention to them. Accoding to CNN, the two organizations have contributed $40 million and $11 million, respectively, during the past year to lobby Washington.
While the banks are getting much of the help from the massive $850 billion dollar bailout, consumers are left with little protection. The massive relief is helping the banks and harming the consumers.
For instance, the recent Credit Card Bill of Rights was designed to curb credit card abuses. But, as the Senate took on the new bailout legislation, they rushed to help Wall Street and not consumers.
The fact is that the bailout will buy not just securitized bad debt from banks, but also their bad credit card debt.
The banks are having Washington cover their exposure to credit card losses, yet they are charging upwards of $50 billion each year in merchant interchange fees to help also cover its expenses. The bailout bill is helping many banks, who were responsible for the abusive tactics and unfair fees.
Now, the government is responding to the lobbyists’ calls for helping not just cover their clients mismanagement and bad mortgage debt, but also the banks’ bad credit card debt too.
The banks are also pressuring congress not to impose regulations because the cash flow from credit card fees and interchange fees are crucial for maintaining financial stability from its other divisions’ losing streak. The consumer credit card cash cow generated $177 billion last year in new revenues to help subsidize its other receding business divisions.
[The] news that Starbucks was terminating 600 staffers is important because the company could have saved those jobs if they didn’t fall victim to the credit card associations’ scheme to train consumers to use plastic rather than cash for small, micro-payment transactions.
Yes, it is easy to handover a premium signature card for a cup of coffee, but did Starbucks know that on those one-dollar transactions, much of the profits are going to Visa and MasterCard’s member banks?
While we are unsure of what Starbucks’ merchant interchange fee rates are, it is transparent that the cost on their small items is vast. Credit card payments are useful to encourage add on purchases when you don’t have cash, but most people have a few bucks in their pocket.
What is Starbucks’ annual global merchant interchange fee?
Has the company also wondered why each international region comes with unique interchange fees, even though the electronic payment service is nearly identical?
Do the Baristas know the difference when they process payment cards as “credit” vs “debit?”
Has Starbucks wondered why there are interchange fees on the four-party electronic payment network, but no fees when they process Starbucks Cards across their network of retail and online ordering.
It’s hard to argue that soaring crude oil costs are driving up the price of a gallon of gas.
But Mitch Goldstone, an Irvine businessman, says credit card companies are making visits to the pump even more painful — adding 8 to 10 pennies to the price of each gallon of gas.
“A bunch of people are angry at gas prices, but consumers don’t know that credit card fees exist,” Goldstone said.
Goldstone plans what he calls “The Great American Protest Against MasterCard and Visa Fees on Gasoline.” He expects to be joined by hundreds of demonstrators, including some gas station owners at the protest Thursday at 7:30 a.m. at the Chevron gas station at the corner of Jamboree Road and Barranca Parkway in Irvine.
Visa Inc. announced June 26 that it was taking steps to address these types of complaints by capping debit card transactions at the pump at 95 cents per purchase — effective July 18. The San Francisco-based company also said it will reduce the fees it charges fuel stations for transactions on its credit cards, called the “interchange rate.”
“Even though Visa’s interchange rates on fuel transactions are already among the lowest in our system, the run-up in fuel prices to today’s unprecedented levels requires an exceptional response,” said Bill Sheedy, global head of corporate strategy and business development for Visa Inc.
In response to questions from the Register on Wednesday, Visa asserted that it was not ultimately responsible for the cost of its services impacting prices at the pump:
“It’s important to note that retailers, such as gas stations, pay what is called a Merchant Discount, which is their cost of accepting card payments from their customers. They pay this amount to their own financial institution, known as a merchant bank or merchant acquirer. Large oil companies often negotiate their merchant discount rate with their financial institution directly and then impose those rates on their franchised stations. In many cases, rates given to stations are marked up by the oil companies. These rates are never set by Visa.”
It’s no secret that some of the cheapest gas in California is sold by ARCO. One reason: ARCO stations do not accept credit cards — and they often charge customers an extra fee for using a debit card to fill up.What’s less well know is how much credit card companies charge to retailers — not just gas station owners, but any company that uses a credit card for a transaction
“Now, a lot more people are being forced to use credit cards because they don’t carry $100 in cash to fill up,” he said.
Essentially, Goldstone says there’s a compound interest problem here.
Credit card companies make retailers pay an interchange fee each time a customer buys something with their card. The fee is based on the size of the purchase. So as a gallon of gasoline soared an average $1.50 — almost 50 percent — in the past 12 months, the credit card companies have increased their fee collections almost 50 percent, without lifting a finger.
In fact, Goldstone argues, credit card companies are doing less work for each transaction, because the technology has improved so much.
“It used to be that we’d make carbon copies of receipts and mail them to Florida,” he said.
Here’s what Visa said in its June 26 announcement:
As an example, under the new rates, if a motorist uses a Visa Signature credit card to fill a 15-gallon tank at $4 a gallon – or $60 total – the acquiring institution generally would pay $0.94 in interchange fees, a savings of 14 percent over current rates. Using a debit card, that same transaction could be cleared within hours, quickly removing the $60 hold that is often placed on a consumer’s funds for one or two days in the current system. For higher transaction amounts, these interchange adjustments have an even greater impact. For a $120 consumer transaction, the level of interchange for the same Visa Signature transaction would be $1.63, for a 43 percent savings. With the cap on Visa Check Card interchange, an acquirer would see a reduction of 59 percent on fuel transactions.
Goldstone, owner of an Irvine photo shop [30 Minute Photos Etc. and ScanMyPhotos.com], is lead plaintiff in a class action lawsuit filed by thousands of merchants alleging that Visa, MasterCard, several banks and credit card companies are violating anti-trust laws. The plaintiffs’ attorney, Craig Wildfang of Minneapolis, said the soonest the case could come to trial is late 2009.
To see a copy of the complaint, filed in U.S. District Court in New York, CLICK HERE.
To see more about how Visa Inc. is offering to help gas consumers, CLICK HERE.
With record-setting gas prices, service stations, motorists, consumers and the entire nation and world have become the latest pawns for Visa, MasterCard and its thousands of member banks to score billions, and few are noticing.
We came across this Tom Breen Associated Press article that helps explain why this is such a heated issue. Finally, according to MasterCard spokesperson, Sharon Gamsin, the second largest electronic payment company has indeed placed a merchant interchange fee cap of $50 for all fill-ups. When was it implemented and why not just charge for the actual cost to transact the electronic payment? Think of the goodwill that Visa and MasterCard’s new shareholders can share with pride, in knowing that their company is helping to lower and soften the impact of these unfair credit card fees.
USA Today’s Chris Woodyard wrote an article on limits at the pumps in this May 30th article. The credit card company tricks persist. Even with the MasterCard cap at the pumps, many are forced to now use multiple cards because the card associations and member banks are imposing $75 limited, which means that the interchange fees are much more, especially when debit cards are used and flat fees apply.
The MasterCard cap at the pumps was first mentioned in 2006, and I was unsure whether MasterCard actually implemented this program. Now that they have (according to Comcast.net News) here are more questions:
Because of the collusive nature of the giant 80% market power that MasterCard and Visa wield, I was surprised that Visa did not follow along. So, it is only MasterCard that has the cap at the pumps? Why did Visa withhold from also limiting interchange fees at the pumps?
Did you know that it can cost more than $1,200 to full up an eighteen-wheeler truck; that is about $25 in interchange fees for something that might cost pennies in real costs to transact over the monopolistic payment networks.
If merchant interchange fees are equally limited to $50 for a Prius and a double-haul big rig, why are not all merchant interchange fees for every other transaction also limited too? The answer is that when you operate a giant cartel – reaping nearly $50 billion dollars in hidden fees – you can do whatever you want… until now.
When gas station manager Roger Randolph realized it was costing him money each time someone filled up with $4-a-gallon gas, he hung a sign on his pumps: “No more credit cards.”
He may be the first in West Virginia to ban plastic, but gas station operators nationwide are reporting similar woes as higher prices translate into higher credit card fees the managers must pay, squeezing profits at the pump.
The total annual merchant interchange fees continue to soar and reflect a growing discontinuity with the nation’s recession and realities that technology and efficiencies should be lowering fees. Instead, according to Robin Sidel’s May 14th WSJ article [“Consumers May Pay For Credit-Card Bill“], merchant interchange fees “generated roughly $50 billion last year.” Robin explained on the phone this afternoon that this rate was based on information from The Nelson Report,
Just how monstrously tainted are these anticompetitive charge-card fees that violate federal antitrust laws?
Look at it this way: Visa and MasterCard’s member banks’ interchange fees last year were much greater than three-times Microsoft’s entire net income of $14.8 billion dollars last year. The total interchange fees charged to merchants and paid by consumers last year were greater than the combined net earnings of Chevron ($17.5 billion), Hewlett-Packard ($7.2), Intel ($6.2), Walt Disney ($4.6), Apple ($3.4), Lockheed Martin ($3.0) McDonald’s ($2.3), Federal Express ($2.0) and Walgreen ($2.0). [source: Forbes 400].
Two of the presidential candidates jumped into the nation’s economic energy crisis today by proposing a “gas tax holiday” to save motorists money.
Senator Barack Obama, was smart and chose not to side with Senator’s Clinton and McCain.And, if the presidential hopeful really want to make an impact, rather than just reducing the record prices at the pumps by temporarily lowering taxes, he should demand that Visa and MasterCard immediately remove their merchant interchange fees at all service stations.Just look at both card association’s record earnings this week [28% quarterly increase for Visa and more than doubling for MasterCard] to understand why this is a national imperative. There is a reason Visa and MasterCard’s stocks are soaring – windfall profiteering at the pumps
The argument that American’s are entering the peak driving season, and thus will increase demand on prices is wrong.Motorists are driving less, and getting rid of their gas guzzling vehicles in exchange for more economical automobiles. Even at ScanMyPhotos.com, we are providing free gas cards to help soften the effects from consumers driving less. Last week, The Los Angeles Times and the Associated Press reported on our campaign for providing free gas.
So far, none of the presidential candidates have pointed fingers at Visa and MasterCard and its member banks for their windfall profiteering from charging upwards of $2.50 in credit card interchange fees every time a motorist fills-up with a credit card.
Today’s Associated Press story, “Charges Fly Over Shops’ Credit-Card Fees: Retailers, Credit Card Companies Battle Over ‘Biggest Credit Card Fee You’ve Never Heard Of,'” has a new twist.
MasterCard’s spokesperson, Sharon Gamsin explained that “The company’s interchange rate has risen less than the rate of inflation…” Nice point if you didn’t understand that the same technology, innovations and unparalleled growth of telecommunications services that make electronic payments more efficient. These Moore’s Law advances that should bring down costs (every 18 months costs should be reduced in half) have led to international phone calls for just pennies a minute, a trilobite of memory for a few hundred dollars and so on.
The point is that MasterCard and Visa’s credit card cartel and its interchange fee pricing structure should not be put in the same equation as the rate of inflation. These are not eggs and milk; it’s an electronic payment network that relies to a grater degree on the logic of Moore’s Law. If that were the case, then lap top computers, cell phones and other technology products would be rising, not declining.
As for the price of an international phone call, could you imagine what it would be pre-phone card and back when AT&T held its anticompetitive monopoly?
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.
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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.) Chairman
House Judiciary Committee
Rep. Chris Cannon (R., Utah) Ranking Member
House Judiciary Subcommittee on Commercial and Administrative Law
Washington
Click here to read the article reported by Jennifer Hewlett in the Herald Ledger on April 7.
Excerpt:
Credit card interchange fees are “killing” convenience stores that sell gasoline, says Roth Bullock, who owns 16 such stores in Kentucky and Indiana. Since 2000, 12 to 14 large companies operating convenience stores in Kentucky have gone bankrupt, and credit card fees are a big part of the reason, he said.
For every dollar spent on gasoline using a credit card, about 2 cents goes to the credit card company. Credit card interchange fees have risen dramatically in the past several years, and more and more people are using credit cards, as well as debit cards, which also carry fees, to pay for gas.
“It’s the second-largest expense we have besides payroll. It is double what utilities are,” said Bullock, owner of Bullock Oil Co., which operates Cowboy’s Food Stores in Kentucky and Indiana.
“Richard Maxedon, executive director of the Kentucky Petroleum Marketers Association, said that many small gasoline retailers in Kentucky are selling out to larger operators because they can’t afford to stay in business any longer, in part because of card fees.
Based on the letter sent to Chase Paymentech customers, we were advised that the announced Visa and MasterCard interchange fee “adjustments” would take place on April 1 and be posted on their website. Well, it’s April 1st and Visa still has the old rates listed.
[Editors note, (April 3) We just checked back today and noticed that Visa’s new fee schedule is now online, but try to figure out what each individual payment transaction charge is and why is Visa’s only five pages when the MasterCard schedule is more than one-hundred?]
At least MasterCard complied and has the new 103 page rate schedule posted, but click here to see if you can guess what the heck is going on.
For us, the best part of MasterCard’s [April Fool’s Day] posting was this gem: “… MasterCard has no involvement in acquirer and merchant pricing policies or agreements.” Good stuff, except when you understand that those that did were the thousands of banks, and with representation on MasterCard’s board of directors which owned MasterCard, prior to the IPO and still maintains a nearly 50% investment.
The magnifying attention to what we assert is illegal price-fixing by Visa, MasterCard and its member banks is gaining concentrated global attention.
After a recent Wall Street Journal commentary (Credit-Card Wars,” Review & Outlook, March 29) that was favorable to one of the publication’s largest advertising categories – financial services – we anticipated a monstrously loud examination from retailers and the public. Today it happened.
There were four letters published in Thursday’s WSJ “Letters to the Editor” section. Our guess is that many more did not make the cut either, including ours (see below). Then again, we already had one published on Jan 10th. See link. For an overview of today’s response and our letters, see below.
The European Union has found, again, that interchange fees charged by MasterCard to merchants are fixed at anticompetitive levels. Instead of recognizing that the nearly $40 billion annual hidden tax on merchants and consumers is based on illegal price-fixing, Joshua Peirez of MasterCard Worldwide hauls out the usual replies (“EU Killing of Interchange Fees Won’t Help Customers,” Letters, Dec. 28).
The fact is that consumers, the marketplace and technology, not interchange fees, are what force innovations within the electronic-payment network. The actual cost of an electronic payment is a tiny fraction of the total fees collected, yet Mr. Peirez suggests that “interchange fees are necessary to fairly share the cost of an electronic payment system.”
Merchants are unable to pay a fair price for using MasterCard’s (and Visa’s) payment network; we are all forced to submit to their market power and their member banks’ ability to collectively fix interchange fees at noncompetitive levels. MasterCard’s long history of anticompetitive price-fixing corrupts its understanding of Economics 101, where the marketplace controls competition, not a board of directors who stand accused of illegal price-fixing.
Mitch Goldstone
President and Chief Executive ScanMyPhotos.com Irvine, Calif.
(Mr. Goldstone is the lead plaintiff in merchant-interchange litigation against Visa, MasterCard and leading member banks.)
“Are Credit-Card Fees Fair, to Whom, and How Best to Set Them?” LETTERS/EXCERPT:
Interchange fees in the U.S. are far higher than those in other western countries. Unfortunately, a market solution is not currently possible because of the credit-card network rules that insulate interchange fees from market discipline. Some credit cards (those with lots of rewards points) cost merchants twice as much as others.
In a normal, free market, we would expect to see these cards priced differently. Credit-card networks, however, forbid merchants to charge more for credit cards than for other, cheaper payment methods, to charge different prices for different card brands or cards within a brand, to accept only certain cards within a brand, or to accept cards only at certain locations and for certain transactions.
Innovation and competition cannot push down interchange rates until the card networks’ artificial constraints on the market are banned.
Adam J. Levitin
Associate Professor of Law
Georgetown University Law Center
Washington
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Your editorial comes to the conclusion that soaring Visa and MasterCard “interchange” fees that cost merchants and consumers more than $35 billion each year are no big deal because “retailers have options to avoid the fees.”
You say merchants can offer a cash discount. In fact, Visa and MasterCard rules make it almost impossible for anyone but gas stations to post both cash and credit prices. And even if they didn’t, the card companies’ systems don’t tell the merchant how much interchange is being charged at the time of purchase, making it impossible to calculate how much of a discount to offer.
You also claim that large chains negotiate lower fees. There are lower-rate categories for a few large merchants based on dollar volume, but Visa and MasterCard refuse to negotiate these rates and impose them on a take-it-or-leave-it basis just as they do for smaller merchants.
Finally, with Visa and MasterCard controlling more than 80% of the market, the question of competition isn’t about other cards or PayPal. The issue is that the thousands of banks issuing Visa and MasterCard cards won’t compete to lower interchange rates. Instead, they have historically come together and agreed to all charge the same high fee for each specific type of card. As we have testified before the House and Senate Judiciary Committees, that is a blatant violation of federal antitrust law.
Visa/MasterCard rules effectively require that billions of dollars in interchange costs be passed along to consumers — a hidden credit-card fee of more than $350 a year — yet most families don’t even realize their pockets are being picked. During the shaky financial times you note, what better way to help the economy than to bring the greed of the card companies under control?
Tracy Mullin
President and CEO
National Retail Federation
Washington
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One important point to merchants that was not developed in the article: It is not the “basic” set of fees for accepting charge cards that many of us take issue with. What aggravates so many merchants and service providers is the fee surcharges that are unilaterally imposed upon merchants for accepting certain types of credit cards most often associated with the multitude of rewards programs so widely advertised.
How do the likes of Capital One so generously offer the merchandise, discounts, and cash back without losing money? They attach a surcharge to these cards over and above what the merchant expects to pay for accepting these credit cards. The merchant must pay the extra fee. Merchants have no control over the surcharge amount which they are charged, so the card issuers can be ever more generous to the card holder at the expense of the merchant.
Bill Gardella, Jr.
Norwalk, Conn.
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Credit-card fees are an ever growing expense for all retailers. Credit-card fraud is rampant. Consumers are now starting to default on their credit-card debt the same way they’ve defaulted on mortgages. Your argument that if it ain’t broke, don’t fix it, doesn’t hold here. Would you have said the same thing about subprime mortgages two years ago? Government should be monitoring this ever expensive and important industry.
Stuart Burke
Hopkinton, Mass.
Our prevous letter to the WSJ didn’t make the cut, but, here’s a copy in response to a WSJ article.
Dear Editor (drafted, Feb 29),There’s more to Eric Felten’s “the burden of gratuitous gratuities” (Weekend Journal, Feb 29) than just that flaunty tipping jar at Starbucks. Most consumers don’t know that when they use a credit or debit card to fund their daily fix of java, it adds to a very hefty tip for Visa, MasterCard and its thousands of member banks that make up their cartel. As Starbucks attunes away from its financial miscues, a giant cost savings would be to return to cash to save consumers from the merchant interchange fees. Each year, electronic payment interchange fees – including those micro-payments of a buck or two bestow nearly $40 billion in cash to the banks. These rich fees were once cost-based and designed for clearing those manual credit card imprinter carbon copy transactions on the Visa and MasterCard network. Today, the lack of competition (Visa and MasterCard own nearly 80% of the market) and the unbridled collusion forces the question: why are these obsolete fees still in force?
Technology and innovations enable instant, automated and efficient settlements that no longer warrant these tips to the banks
The joke was on American consumers today – April Fool’s Day – in Washington, D.C.
Congress heard from oil industry executives to discuss the record-setting economic energy crisis and profiteering at the pumps. The group that was not there were MasterCard, Visa and the major banks. And, the question to them that was not asked was why they are able to demand a percent from every fill-up when electronic payment cards are used? The banks reap about $2.00 in interchange fees from every fill-up when you use plastic to pay at the pumps.
Call it what you want, but the attempt by Citigroup Inc. to restructure it’s credit card business could be nothing more than a scheme to protect the bank from its multi-billion dollar merchant interchange credit card liability. Just as MasterCard and Visa sought to distance itself from the interchange antitrust price-fixing complaint, the litigation is based on transgressions dating back years.
Just as with MasterCard and Visa’s new shareholders, the question for Citi is who will be left holding the interchange woes as part of the consumer restructuring? Is the consolidation of its worldwide credit card businesses, run by Steven Freiberg, CEO of Global Cards, an attempt to distance the bank of its alleged liabilities? If investors could pump billions into a questionable Visa Inc IPO, will anyone even notice what seems like a shell game to cast off what could end up drowning the bank?
This summer, the 1960’s television sitcom, “Get Smart” is making its theatrical release.What might this have to do with Citi’s restructuring?Everything.To paraphrase the ongoing joke in “Get Smart,” ah, the old A, B, C way to spin off their business trick.Today’s news of the restructuring of its credit card business might be followed by similar attempted liability escapes by other banking giants.From our prospective, this has more to do with the old adage of how to raise money and hedge your risks. As the story goes, there are three types of investments for betting on new oil wells. “Type A” – a sure thing – is where you know that oil is in the ground, it is seeping out of the surface — you are swimming in the stuff and that is where you personally invest along with your closest friends and family members. “Type B” – we’ll, we’re in Texas and there’s just got to be oil here – is when there might be oil, but you have to drill and explore; this is where you get the neighbors and distant friends to go along. And, “Type C” – throwing darts at a map – is where you haven’t a clue; this is where “investors” risk the capital. With a multi-billion dollar antitrust price-fixing class action threatening the core of Visa, MasterCard and its thousands of member banks’ merchant Interchange revenue stream, what better way to hedge your investment than to split off the impending liability?
Today marks the third year since ScanMyPhotos.com launched WayTooHigh.com – The Credit Card Interchange Report. It is also about the time we received that infamous rate increase letter from Chase Paymentech which was sent to millions of merchants just like us.
Some rates have risen more than 300% in the past few years. The most recent rate “adjustment” letter arrived days ago, but does not identify the new fees until after they take effect. That sympathetic letter from our payment processing service announced a rate increase when cardholders had us process their affinity, frequent-flier signature cards; a quality causing retailers to effectively also be taken on a ride. That was the letter which led to The Wall Street Journal front-page Marketplace profile on our parent company [30 Minute Photos Etc.] and the beginning of our Federal class-action complaint against Visa, MasterCard and international major banks.
Changes have occured over the years. Merchant interchange rates have continued to ascend, while our traditional photographic film business wallowed due to the same technological shifts which made digital more practical. These are the efficiencies which also helped bring down many antiquated analog services. Next to film, the yellow page directories, fax machines and thousands of other businesses, the changing times also drew attention to the $40 billion annual merchant interchange debacle which didn’t budge.
But, unlike other businesses that were forced to change, the two giant credit card associations and their 80% market power kept trudging along. Today, film, phone books and other once shining business models are historic vestiges from an antiquated past. However, the electronic payment network, which today is super-fast, efficient and liberated from the days of manual credit card imprinters and carbon-copy receipts (that had to be mailed away for processing) remains.When you study the free interchange processing for checks, and international interchange rates that are a third and less the cost in the U.S., you quickly understand that Visa and MasterCard’s game – managed by thousands of member banks – is blemished. Their anti-competitive price-fixing is illegal and drawing international attention and loud shouts from Washington D.C.
While this website has been written in our voice, as a retailer who best understands the issues, we have also become the leading personality and fixture behind the interchange battle. And, it continues to gaining traction. Visa and MasterCard restructured their companies, but the issues and fees remain as do their potential liability.The mix of banks, public relations and legal firms which read our comments each day is shared with close scrutiny by Visa, MasterCard, and much more importantly by other business owners, governments and associations around the world. From giant multi-national conglomerates to “mom-and-pop” shopkeepers, we have been reporting, sharing commentary and observations with the world community which is also causing grief to Visa and MasterCard. WayTooHigh.com and the nearly fifty other class-actions suits after we filed the first are shining a knock-down message that time is running out on the cartel’s imposing might.
Many of you have been following the shift in our business too – from film to digital and our extraordinary international media coverage for the new super-fast photo scanning business model we pioneered. From multiple articles in The New York Times, The Wall Street Journal, USA Today and scores of other media coverage, the entrepreneurial passions at ScanMyPhotos.com was successful in making the leap from analog to digital. So, why hasn’t Visa and MasterCard also transitioned from an ancient , cost-based interchange fee structure to one that represents today’s technological realities?
In the late 1980’s technology evolved where transactions were processed electronically and paper records were not needed for most payment card transactions. Since that time, the costs of various components of credit card transaction processing (phone, data processing and Internet services have decreased significantly. These changes led to significant reductions in the costs of processing payment card transactions.
As class-representatives, on behalf of the millions of merchants with shared dedicated to eradicating supra-competitive interchange fees, we will continue to engage and call attention to this multi-billion dollar injustice.
Click here to read the March 22 article by Alan Wechsler in the Times Union.
[Of note is that the bank’s along with Visa and MasterCard’s proxy, Trish Wexler at their Electronic Payments Coalition advocacy group explained in the article that “Credit card companies say government has no right to get involved.” This probably was the same argument the robber barons voiced in the 1800s when the railroad owners forced farmers to pay whatever they demanded to transport their goods to market. Interchange fees are just as antiquated and were designed a generation ago to process four-party payments over the Visa and MasterCard network, back when we merchants used manual credit card imprinters and carbon copy receipts. As for Ms. Wexler, this is why we have the Sherman Antitrust Act, because Washington listened. The goal of WayTooHigh.com – The Credit Card Interchange Report is to derail the banks’ arrogance.]
Excerpt:
“There’s growing retailer resentment over the fees Visa and MasterCard charge for using their cards. More than 40 years after the cards were first introduced, nine states, including New York, along with the federal government, are pushing for laws to control the power credit card companies have over businesses.”
“It’s really out of control,” said Mallory Duncan, senior vice president and general counsel at the National Retail Federation, a trade group in Washington, D.C. “The rates keep going up, the terms are horrendous and it’s a cost that retailers and their customers have to bear.”
Click here to read the USA Today article by reporter Kathy Chu.
Excerpts:
“As the economy has worsened, card issuers have become more selective about offering credit to new customers, and in a growing number of cases, are shrinking card holders’ credit limits. Yet they’re still sending more solicitations to existing credit card customers. In 2007, issuers increased their solicitations to existing customers by 15.6%, advertising rewards and other perks to promote spending, according to Mintel, a firm that tracks such mailings.”
“Subprime customers — among the most profitable for banks because of the high rates and fees on their cards — saw a 41% jump in direct-mail credit card offers in the first half of 2007, the latest period for which figures were available, compared with the same period the year before, Mintel found.”
Click here to view the March 10th AdAge article by Matthew Creamer (Subscription required).
Excerpt:
“Debt: It’s the new obesity. Just as food companies have gotten spanked for pumping their products full of fat and sugar, companies that spend big to market credit cards and add more flab to the already-chunky financial waistlines of Americans are coming under increasing fire from politicians, consumer advocates and customers feeling burned by their monthly statements.”
“Just as food companies have gotten spanked for pumping their products full of fat and sugar, companies that spend big to market credit cards and add more flab to the already-chunky financial waistlines of Americans are coming under increasing fire from politicians, consumer advocates and customers feeling burned by their monthly statements.”
As merchants continue to question and fight the nearly $40 billion paid out through interchange fees each year, this is a smart solution to remedy some of the issues.
Advertisements that are customized and adjustable can be printed on the charge receipts with the same ease as posting the exact merchant interchange fee right above it, on the paper that cardholders receive with their purchases. This way, retailers and cardholders know exactly what they are paying for interchange fees, just as they see the separate sales tax line item on all receipts.
[Click here for March 19, AP story on Visa Inc. IPO by Michael Liedtke]
Based on Visa Inc’s. closing stock price after its first day of trading (down by more than 12-points from its intra-day trading high of $69 a share), the giant credit card association’s market value is about $45 billion. The stock was up just $1.50 a share from its trading-day low of fifty-five dollars. Even so, the credit card cartel’s valuation is still $5 billion shy of the reported $50 billion potential legal liability, according to Legal Times. As with MasterCard, the antitrust liability could lead to the company’s insolvency, according to Visa’s SEC filing.
While Visa might be somewhat insulated from credit problems facing the banks, which still own nearly half the company, they along with MasterCard are very much in the cross-hairs of the merchants who are forced to accept the card cartel’s dominant 80% market power.
Even as a new group of owners join the thousands of member banks by stepping onto the field, the years of antitrust price-fixing charges remains with the new and prior owners.
Because the new Visa Inc. shareholders remain hypnotised by the market success of MasterCard’s IPO, here are some leading morning-after profiles about why the banks bailed on Visa, cashed out $10 billion, plus another $3 billion for litigation reserves.
Visa is the richest IPO ever in U.S. history, but for who?
Did you know that the initial initial public offering was expected to yield only $5 billion? And, after deducting the legal reserves, the banks and the underwriters proceeds that is about all that might be left.
Click here to read the Andrew Snyder article in Today’s Financial News
Excerpt:
“…Instead, Washington wants to uncover the secretive fees most consumers know nothing about. After all, these “interchange fees,” which are the fees credit card companies charge vendors for the ability to accept and process their cards, cost Americans (even those that pay with cash) more than $42 billion last year.”
“When you and I complain to our elected representatives, chances are, little action will be taken as a result of it. But when political and economic powerhouses like Wal-MartAllen-Questrom-Q-A and Target pick up the phone, Capitol Hill starts to move. That is why MasterCard shareholders and future Visa shareholders need to pay attention. If Washington (or should I say Wal-Mart and Target) gets its way, credit card industry revenues will be slashed.”
Non eco-friendly relics from last century, like photographic film and bulky Yellow Page directories, in our opinion, share something in common with Visa and MasterCard’s interchange fee structure.
Even worse, the billions of bank-mailed credit card solicitation junk-mail sent each year fill up land fills along with billions of plastic charge cards cast-away. Whether it is Interchange fees, photographic film or Yellow Page print directories, in our opinion, they are all obsolete in today’s high-tech society.
The difference is that consumers and businesses can quickly adopt. Most have switched from film too digital, and many are switching from print to Internet advertising [Click here for an overview of phone book giant R.H. Donnelley’s quandary]. The manufacturers adjusted too. Many directory listing companies are offering online solutions.
And, in our case, retailers like us modified the entire photo business model. Entrepreneurs are switching from print Yellow Page advertising to Google and other online directory listings. For ScanMyPhotos.com, we were forced to change, and fast. AT&T Real Yellow Pages “forgot” [they literally forget] to run one of our display ads last summer in Central Orange County, California. These are the legally contracted ads we place every year and were an essential marketing tool for us.Subsequently, in preparing for our new Blog: YellowPage the Dinosaur, we contacted several others in our industry and they share our opinion of the Yellow Page’s demise. [website: blog.yellowdinosaur.net].As the phone stopped ringing from local customers, we were fortunate that ScanMyPhotos.com also relies on national customers, our website and Blog: Tales from the World of Photo Scanning to spark traffic and new customers. For complete information on our quagmire see our new Blog: YellowPage the Dinosaur. Our Yellow Page story was just profiled in B to B Magazine, but we are still out the more than one-hundred thousand dollars from lost revenues . Even one of the online directory companies picked up on our predicament and has the ScanMyPhotos.com new customer profile on their site.What does this have to do with our interchange fee battle?
As technology and efficiencies caused oceanic-sized changes to the Yellow Pages and film businesses, Interchange fees continued to rise. Interchange fees were designed to be cost-based to cover the four-party payment network when we used those antiquated manual credit card imprinters and thick stack of carbon-copy receipts. Unlike with film and the Yellow Pages, merchants cannot easily switch to other electronic payment networks. The 80% market power exerted by Visa and MasterCard is insurmountable.
Like most merchants, doctors offices and millions of all-sized companies, we are forced to accept Visa and MasterCard – pay their non cost-based rates [$40 billion annually] and even their whimsical fee adjustments. Another fee adjustment was recently announced, but merchants won’t know the new rates until after the Visa IPO occurs and not until the day the new rates are imposed on April 1st – April Fool’s Day. These unchallenged and unfair fees are, after all, how we got started with our antitrust litigation in the first place. [Click here to read 2005 The Wall Street Journal article by Wendy Bounds and Robin Sidel]. Back in 2005, both Visa and MasterCard collectively and “coincidentally” were united in sharing the announcement that their signature affinity cardholder interchange fees were rising. This action caused merchants to also be taken on a ride when cardholders paid with their plastic frequent-flier cards. And, they are at it again, with a planned April 1 new rate adjustment.Whether it is film or yellow page directories, we modified our business model. But, when it comes to gallant, anti-competitive, cartel price-fixing, retailers are unable to modify our practices. Photographic film’s demise caused havoc on many business. The Yellow Page ad that AT&T forgot to run for us equally had a detrimental impact.However, with Interchange fees we, like millions of other merchants are all beholden to Visa and MasterCard. The day we stop accepting Visa and MasterCard is the day we are forced to close down, yet we are forced to pay whatever rates they impose.————————————————————————————-
On the eve of Visa Inc’s bank bailout, we have this news: interchange rates are changing, but we have no clue what it will be until after the IPO is completed.
What other business can announce they will adjust their fees, but will not let you know its new rate schedule and how it will impact your wallet until the day it takes effect? No, not the petroleum industry. But, it does take a mirror-like cartel with unbridled market power to decree these types of changes.
Over the past years, MasterCard and Visa have both attempted to retool and convert from their bank-owned control by hiring an independent board of directors and restructuring to help respond to our antitrust assertions.
This, along with other measures were designed to soften the reality that both credit card associations run a monopolistic enterprise, where its card network fixes prices at supracompetitive levels. Even the letter we received from Chase Paymentech married MasterCard and Visa together to virtually make them indistinguishable from each other – they are so similar that the processing company didn’t need to send two separate letters, but, instead batched both announcements together as one.
It seems that all the good changes that Visa and MasterCard enacted to move forward were just window-dressing. The reality is all here in this letter.
On April 1st, the two credit card associations will press a button and unilaterally change several merchant interchange rates. As merchants, we will be kept in the dark until … April Fool’s Day!
We will not even know the new rates until we view our statement a month later, or visit the Visa and MasterCard websites, which require an advanced degree in gobbledygook to decipher.
We just received a letter from Chase Paymentech dated March 4th (today is March 14), that on April 1st, both MasterCard and Visa will be adjusting their merchant interchange fees and certain rates may increase. All we know now is certain merchant interchange rates will be “modified.”
This is the link that Chase Paymentech provided for Visa, but the new rates will not be posted until April 1, the day the new rates take effect.
As for MasterCard, try figuring out what this means from the link provided by Chase Paymentech.
Mitch Goldstone Leads A Rebellion, This Time Against Credit Card Fees
By Robert Barnett – University of Southern California “Marshall Magazine“It pays to read your mail, as Mitchell Goldstone knows and Visa and MasterCard are finding out.
Goldstone, a 1985 graduate of USC Marshall School of Business, and his partner, Carl Berman, are the co-founders of 30 Minute Photos Etc. and its online sibling, 30minphotos.com which, as the names suggest, develop photographs from film and digitized files, respectively.
Goldstone has made lots of news over the years, but nothing like this summer when his company became the lead plaintiff in a class action antitrust suit against Visa, MasterCard and major banks. The story made the pages of the Wall Street Journal, Time magazine and the New York Times.
Filed in federal court in Connecticut in June 2005 with four other small and midsize businesses, the suit accuses the credit card companies and the banks that issue their cards of illegally fixing the interchange fees that merchants pay for credit card transactions. The credit card companies have defended their interchange fees, with MasterCard’s general counsel calling them “beneficial, efficient and pro-competitive” in a statement the giant credit card company made during a recent Federal Reserve hearing.Controversy is nothing to new to Goldstone. He’s drawn to social and economic causes the way some people have hobbies, and thinks nothing of spending hours and time and money–and overlaying all that with entrepreneurial inventiveness–on an array of projects. In addition to the class action suit, he organized Operation Photo this year to collect digital cameras for families of soldiers deployed overseas. He promoted tsunami relief for the Red Cross on the company website. He ran for city council in Irvine, CA.But the lawsuit against the giant credit card companies represents the biggest, most formidable opponent that Goldstone has ever faced. If he and the other plaintiffs win, it could cost the credit card companies billions of dollars.As with many of Goldstone’s past crusades, this one started almost by accident. In February, Goldstone and Berman received a notice in the mail that their interchange fees were being raised. “I usually throw them away,” Goldstone explained, ”but Carl brought it to my attention. When we started the business in 1990, there were a handful of interchange fees. Now there are nearly 100 different rates. And they’ve all been going up steadily. For example, the fee for debit cards has gone up 300% since 1999.”Goldstone wrote to the senior management at Visa and MasterCard, asking them to rescind the increase. “Always start at the top,” Goldstone stresses. “It’s one of the greatest lessons I learned at Marshall.”
No answer. He followed up with a phone call to the two companies. Still no response. And that got the ball rolling.
Today, Goldstone and Berman write and edit the blog, “WayTooHigh.com,” posting articles and editorials on the interchange fees and arguing that the fees are a hidden tax on consumers since they become part of the cost of all goods and services purchased. Their retail rebellion appears to be spreading. Kroger and six other national retailers filed their own suit against Visa U.S.A., and charged it with anticompetitive practices.
Creating a national groundswell for a cause he believes in is nothing new to Goldstone. In fact, he enjoys it. “It makes it fun,” Goldstone insists, “knowing we’re doing something that is going to help somebody.” In a sense, he sees it as part of his job. “That’s what being an entrepreneur is all about,” as Goldstone sees it. “It’s not just about making money. It’s about doing something that’s good because that’s the ultimate scorecard.”
Organizing Operation Photo is a perfect example of how social and economic issues just seem to find Goldstone – and how he uses his entrepreneurial skills to identify and promote a solution.
“I got a phone call at 7:00 in the morning right after Christmas of last year from Jennifer Petersen, a former 30 Minute Photos Etc. employee who had left to become a full-time mom,” recalls Goldstone. “She’d had a dream the night before. What if her husband was serving in the military and he wasn’t able to see their daughter? Was there any way we could get people to donate cameras to give to military families? By 8:00, the business plan was already cemented and finalized.”
Within days, they had Operation Homefront onboard to coordinate distribution, secured pledges from Kodak and other digital camera manufacturers for hundreds of new cameras, set up a “Operation Photo” website with a link from the 30 Minute Photos Etc. homepage, the press had jumped on the story, and the first cameras were already flooding in.
By the time Operation Photo wrapped up on July 4, it had collected over $150,000 worth of cameras and distributed them to grateful and appreciative families in and around military bases all over the country. In fact, many of the photos of new babies and birthday parties now being shared overseas are being developed at 30 Minute Photos Etc., thanks to its military family discount.
Goldstone always wanted to be an entrepreneur. A New Yorker by birth, he applied to USC specifically so he could enroll in what is now USC Marshall’s Lloyd Greif Center for Entrepreneurial Studies.
Goldstone and Berman started 30 Minute Photos Etc. in 1990 on the premise that family photos were among our most treasured possessions. They separated themselves from the one-hour and overnight photo competition by beating them in turn-around time, delivering a higher quality photo, staying ahead with new technology, and building a client base that included Hollywood celebrities and California Governor Arnold Schwarzenegger.
In the late 1990s, 30 Minute Photos Etc. was blindsided by the digital revolution in photography. Suddenly customers weren’t bringing in rolls of film. They were printing them off their home computers. Business took a nosedive. Goldstone transformed the company into an online boutique photo service, creating a website for customers to format and edit their digital images, and with the click of their mouse, have high quality prints processed and shipped immediately to wherever they lived in the United States. He even put a 24-hour live support capability right on the website.
Still it was a struggle to rebuild the business. In 1997, Goldstone bought some local cable spots for the MTV Video Music Awards, only to discover that the show would be featuring rap singer Eminem performing live. Offended by the rapper’s lyrics, Goldstone bought up all the local commercial time for the awards program so that organizations including the Family Violence Prevention Fund, the Museum of Tolerance, and the Human Rights Campaign Fund could ran public service announcements educating viewers on violence against women, bigotry, and gay rights.
“That was extremely expensive,” Goldstone recalls. “This was our whole campaign to get younger adults excited about our business and to use it. Instead we ran those spots because we believed it was the right thing to do. As it turned out, we also got a lot of media coverage for the educational campaign and ourselves,” he continues.
So what’s next for Mitch Goldstone? Wait and see. Visa and MasterCard may regret not answering their mail.
It’s a new record, U.S. crude oil just hit $111.00 a barrel.
What does this mean for the members banks and the two giant credit card associations? Why aren’t people noticing that the credit card associations along with its member banks are reaping giant windfall profits from our economic energy crisis?
How can they justify reaping windfall profits during the global economic energy crisis?
Did you know that each time you use plastic to fill up at the pumps, you are forced to pay upwards of nearly $2.00 just in electronic payment interchange fees?
Gas pump prices from photos taken by WayTooHigh.comon March 9, 2008 in Malubu, CA
Accredited media are invited to contact Mitch Goldstone, President & CEO of ScanMyPhotos.com, the lead plaintiff in the Payment Card Interchange Fee and Merchant Discount Antitrust Litigation against Visa, MasterCard and leading member banks of the two giant credit card associations.
For a detailed history and prospective on the interchange battle, issues pertaining to the Visa IPO and commentary on the new legislation introduced by the US House Judiciary Committee – to enable merchants to negotiate interchange fees – Mr. Goldstone is available to share his prospective.
Mr. Goldstone is an entrepreneurial expert who co-owns a nationwide Ecommerce and retail business based in California since 1990. He co-edits WayTooHigh.com – The Credit Card Interchange Report and leading, well-known personality in this multi-billion dollar merchant interchange battle.
To schedule an interview, accredited media may email: Goldstone (at) 30minphotos.com.
WASHINGTON DC – Congressman Chris Cannon (R-UT), along with Judiciary Chairman John Conyers (D-MI), today introduced the “Credit Card Fair Fee Act” (HR 5546) to address the anti-competitive aspects of credit card interchange fees and save American consumers and American families billions every year.
Upon introducing this legislation, Congressman Cannon said, “Free market capitalism is the most successful economic system the world has ever witnessed. Bedrock principles of that system include transparency and competition. The current system of setting fees that merchants pay for credit card transactions is anti-competitive and secretive. This bill does not set prices. Instead, it would require that fees be set in a transparent manner so other companies can compete for business and consumers would not pay artificially high rates.”
Cannon continued, “In the end, credit card companies should set whatever fees the market will tolerate. This bill is a win for consumers, for retailers, and for the credit card industry which will benefit from competition.” In closing, Congressman Cannon said, “This is a complicated issue. This bill may not be the final answer, but society’s interest in this is so great that we hope all interested parties will come to the table.”
Each year, consumers pay billions of dollars in hidden fees that never appear on their monthly statements. Those fees are called “Interchange fees.” Credit card companies and their banks charge them to store owners, businesses, or anyone else anytime a credit card is used to make a purchase. As much as $2 of every $100 you spend goes to interchange companies or the banks behind the card. Last year, more than $36 billion in interchange fees were collected, up 17 percent from 2005 and 117 percent since 2001.
The average American family is now paying more than $300 a year in credit card interchange fees. Retailers are then pass along the credit card interchange fee to consumers in the form of higher prices. The credit card interchange fee increases the price of everything consumers buy, even those who don’t use plastic and choose instead to pay for their purchases in cash or by check because retailers are not allowed to offer lower prices for cash or debit transactions because of their agreements with Visa and Mastercard.
For example, with the price of gas at more than $3 a gallon, credit card companies and their banks are collecting as much as 8 cents a gallon in interchange fees. Americans are paying the highest interchange fees in the world, an average of two percent, compared with less than one percent in most other industrialized countries. Credit Card fees have a complex pricing structure, which depends on the card association, the type and size of the merchant, the type of credit card and the type of transaction.
WASHINGTON–The National Retail Federation today welcomed the introduction of landmark antitrust legislation that would address hidden MasterCard and Visa fees that cost merchants and their customers more than $40 billion a year.
“This legislation would use the nation’s antitrust laws to rein in the greed of the credit card companies,” NRF Senior Vice President Mallory Duncan said. “With the rapidly increasing use of plastic, credit card companies and their banks are seeing a windfall that is costing U.S. consumers tens of billions of dollars each year. These are fees that most consumers don’t even know they’re paying because Visa, MasterCard have tried to keep them secret. The introduction of this legislation marks the beginning of the end of credit card company rip-offs.”
“Rather than allowing these fees to continue to be set in secret and imposed on a take it or leave it basis, this legislation would require negotiations and allow retailers to seek fair terms and conditions that will ultimately mean a better deal for consumers,” Duncan said. “Consumers are already angry at the way they’ve been treated by credit card companies, and this bill is an important step toward making credit card companies treat both merchants and their customers with respect.”
The Credit Card Fair Fee Act was introduced today by House Judiciary Committee Chairman John Conyers, D-Mich. The bill is the first attempt by Congress to address credit card interchange fees, and is the outcome of a hearing held in July 2007 where Duncan, testifying on behalf of NRF and the Merchants Payments Coalition, argued that interchange practices violate federal antitrust law.
Averaging close to 2 percent, interchange is a fee Visa and MasterCard banks charge merchants every time a credit card or signature debit card is used to pay for a transaction. Visa and MasterCard collected an estimated $42 billion in interchange fees in 2007, an increase of 17 percent over the previous year and 150 percent since 2001.
Interchange is largely unknown to most consumers because Visa and MasterCard don’t disclose the fee on monthly statements and effectively keep merchants from disclosing it on receipts. But Visa and MasterCard effectively require merchants to pass the fees on to consumers by requiring them to be included in the advertised price of items and making cash discounts difficult. The fees amount to about $350 per household each year.
The Conyers bill would require credit card systems possessing “substantial market power” to negotiate with merchants to reach a voluntary agreement on credit card terms and conditions. If an agreement cannot be reached, both sides would be required to submit to binding arbitration by a three-judge panel appointed by the Department of Justice and Federal Trade Commission.
The arbitration proceedings would take place with a limited 60-day discovery period and other statutory deadlines, and the judges would be required to apply a market standard reflecting a perfectly competitive system where neither side had market power. Terms and conditions set by the panel would be in effect for three years, at which time the process would repeat itself. Both sides would receive limited immunity from antitrust laws in order to participate in the process.
The legislation requires that terms and conditions set under the process be available to any merchant regardless of size, industry or location. Individual merchants or groups of merchants would remain free to negotiate voluntary arrangements with credit card companies and their banks.
NRF is leading retailers’ fight against soaring interchange costs. During last summer’s testimony before the Judiciary Committee’s Antitrust Task Force, Duncan explained to lawmakers how Visa and its member banks come together to set interchange rates that all banks agree to charge regardless of which bank’s name is on a card. MasterCard follows a different procedure that also results in all its banks agreeing to charge the same. In either case, the two card associations each operate as illegal price-fixing cartels in violation of antitrust law, he said. With Visa and MasterCard together controlling at more than 80 percent of credit card purchase volume, retailers cannot afford to refuse the cards, he said.
The National Retail Federation is the world’s largest retail trade association, with membership that comprises all retail formats and channels of distribution including department, specialty, discount, catalog, Internet, independent stores, chain restaurants, drug stores and grocery stores as well as the industry’s key trading partners of retail goods and services. NRF represents an industry with more than 1.6 million U.S. retail companies, more than 25 million employees – about one in five American workers – and 2007 sales of $4.5 trillion. As the industry umbrella group, NRF also represents over 100 state, national and international retail associations. www.nrf.com
“According to a group of prominent bankers, a lawsuit brought by retailers in the US alleging a number of major credit card issuers and banks colluded to fix processing prices will have far reaching consequences for the industry at large if it is successful…”
Click here to view the article in “Banking Business Review”
Is anyone else wondering why there is silence as the banks, Visa and MasterCard are celebrating extraordinary windfall profiteering at the pumps? Crude oil reached another record high – $105.97, which means even more profiteering.
Retailers also are hit with additional costs because of chargebacks, known as “Reason Code 96.” While retailers have not seen the specific rule (no retailer has seen the complete credit card operating rules that they are told to follow) they can be denied payment by the banks if they authorize a pay-at-the-pump transaction for more than $50 for Visa and more than $75 for MasterCard, even though the transaction is not challenged by the customer. As long as fuel prices remain high, “Reason Code 96” will substantially increase the cost of credit card acceptance.
When was the last time you read about competition among the two giant credit card networks, which until recently were both co-owned by the same thousands of member banks? [The banks still control a hefty share in MasterCard and full ownership of Visa, pending its possible IPO later this month].
Study most other industries and you will learn about real competition and aggressive marketing to win owner customers and market share.
JetBlue Airways and Virgin America represent the exact inverse of cartel-like price controls by agreement. The two airlines are challenging each other in the Los Angeles market with super-low airfares, even those energy costs are at all-time record highs. This is a study of competition gone right; some airfares to San Francisco and even cross -country to New York are at unheard of fares – $44 each-way from LAX to SFO and just $248 round-trip from LAX to JFK!
There are many choices, a variety of carriers and convenient flights to popular destinations. Even though the airlines face supra-competitive interchange fees, and most tickets are paid for over the Visa and MasterCard network, where variable interchange fees are required, it is a study in how competition should work.
Even so, MasterCard today questioned the European Union’s decision to force the credit card cartel to stop undermining real competition and innovations. [See MasterCard news release]. Instead, they should review the airlines’ ability to fairly compete and remember that the two giant credit card associations own a suffocatingly large 80% payment network market share. To merchants like us, MasterCard and Visa are anything but hip, as compared to the smart management leadership at Virgin and JetBlue.
We are troubled that at yesterday’s (Feb 28) Presidential news conference, Mr. Bush was surprised and unaware that Americans are paying nearly $4-a-gallon to fill up their cars.
Of equal concern is that if the President was surprised and unaware of what motorists are paying at the pumps, then he must also be in the dark on the nearly $40 billion siphoned out of our wallets each year by the banking cartel for merchant interchange fees for Visa and MasterCard’s electronic payment network.
But, now that he knows it, the next question is why are the banks able to force motorists using plastic at service stations to fork over a percent of each fill-up? These fees were designed to be cost-based, not to enrich thousands of banks who use these revenues to cover their billions in losses from misguided mortgage and other fiasco’s.
MasterCard had earlier announced a $50 cap at the pumps, but we are unsure if that ever took hold, and we are not sure if Visa followed along. Did they? And then two more questions:
Why are the banks still able to get upwards of 1.7% for each charge?
If the credit card associations can place a limit on interchange fees at the pumps, why not for all electronic payment transactions elsewhere, from Rolex watches to a latte at Starbucks?
Many of you have been reading our news and commentary updates on our multi-billion dollar merchant interchange fee litigation against Visa, MasterCard and its member banks since 2005. Since then, we have provided nearly 1000 news and commentary updates. Mostly, we have stayed on message…. until now.
Outside our role in representing millions of businesses, we take this moment to pause, step back and salute a real American icon and the world’s next mega-superstar, David Archuleta.
While unrelated to our antitrust litigation against Visa, MasterCard and the world’s leading banks, this young singing sensation is capturing the world’s attention. With our international readership, many overseas will be wondering who this singer is? Why he is so special? And, how can he capture the world’s attention to become the most famous of “American Idol’s” stars?
Along with thousands of other bloggers writing similar words of support, WayTooHigh.com applauds our country’s next sensation and gift to the world.
This Spring, David will become the second most Googled name in the world, after U.S. Senator Barack Obama, who we predict will be elected as the next President of the United States of America. [Especially after earning the endorsement from fellow U.S. Senator Christopher Dodd (D-CT), Chairman of the Senate Committee on Banking].
Along with millions of fans, we too are so confident that David Archuleta will win the hearts of America, that it was worth this pause from our daily news and commentary updates in the battle against Visa, MasterCard and its member banks to celebrate our nation and the world’s next mega-superstar.
Today, a reporter suggested we should be happy that Visa Inc. is setting aside a $3 billion reserve for our litigation. No, not really.
The credit card giant is playing an unfriendly game in its pursuit of detachment from their legal liability for illegal price-fixing by agreement. If you step back and read several of our preceding comments, you will notice that when first announced, many hinted that Visa Inc. could anticipate raising $5 billion, then it was $10 billion. Now, it is nearly $19 billion.
Was this caused by unearthly market conditions, inflation or because they were simply padding the amount of money they hope to raise to cover their legal liabilities?The worry is that they could simply use investor proceeds to fund settlement of our litigation and then continue raising merchant interchange rates to more than cover the lost revenues. To us, that is as unfair as are their interchange fees.A review of the earlier credit card litigation identifies that for merchants and consumers, the fair market economy is still broken and there still is no real electronic payment competition. Visa and MasterCard’s cartel-like pricing structure still precludes a real resolution to interchange fees. From the preceding resolution, Visa and MasterCard simply raised other rates to adjust for their penalties, thus more than paying for their fines.
It’s a record price at the pumps, which again raises the question: why are the banks allowed to reap windfall profits during our nation’s economic energy crisis?
As more motorists are forced to pay with plastic – due to the record costs to fill up their tanks, Visa, MasterCard and its thousands of member banks are earning windfall profits. They demand a percent of each sale for each credit card transaction, even though the interchange fee cost is nearly zero (it is estimated that the actual fees to process electronic payments are about 13% of the total interchange fees collected).
[click here for related story on “House of Cards – consumers turn to credit cards amid the mortgage crisis]”
We’re not quite sure how to react to the news that MasterCard is lowering, that’s right, lowering certain interchange fees.
Will Visa follow along?
Does this apply only to credit cards, or are flat fee debit and PIN-based cards be accepted, and thus cost a about 50-cents for the entire interchange fee transaction?
According to Digital Transactions Magazine (Feb 21), MasterCard is promoting a new rate category to promote their electronic payment service for certain real estate transactions, such as with property managers to encourage renters to pay with plastic and get cardholders to eventually pay their utility, insurance and other bills with MasterCard.Don’t get carried away, because there are still huge windfall profits to be made by the credit card association and its member banks. The article indicated the new rate category would cost about 1.1 percent in interchange fees.Property managers should be on alert, because what once incurred no charge from cashing checks, now will come with an added interchange fee that will cost them – and thus the cardholders with a 1.1% fee. It is not as if cardholders will be more incentivized to pay their bills; their rents are fixed – what is more likely is that consumers will go further into debt and end up paying usurious finance changes when they have new balances on their cards.This is a win-win, but not for everyone.Consumers and those accepting the cards will pay more than before when no clearing fees were mandated. The winners: MasterCard and its thousands of member banks.So, what gimmick will Visa launch to top this indignation?
We have long questioned the genesis of how interchange fees are invented. Our litigation accuses MasterCard’s board of directors of illegal price-fixing to artificially set rates. But this new rate structure raises another question: what is the genesis of those new rates? How can MasterCard create another unique rate? What are the actual costs for processing rent payments versus buying a high-end Rolex watch at Cartier? Are there real differences? Why does MasterCard need a 100 page fee structure for their interchange rates. And, another question: if MasterCard could “lower” a specific rate, why not all rates? OK, and one more question: Are these rates really “lower,” when you survey the global picture, where some interchange rates are zero and others are a third of the rates mandated in the U.S.? This is just a giant shell game and one which MasterCard and its co-defendant cartel partner, Visa, are up against a growing wall of descent.
The only “real estate incentive” could be the further bloated-size of the vaults at the banks and MasterCard as they prepare to open up a new revenue source for themselves.
With almost 1,000 posts since our battle against Visa and MasterCard began in 2005, we have a milestone to announce.
It is not just the multi-billion dollar interchange fees that are at record highs. Even gold and oil’s record highs today are not in a field of their own. WayTooHigh.com – The Credit Card Interchange Report also recorded its highest number of recent daily visits today. And, to think, we are not even a cartel – just entrepreneurs taking on the banks and Visa and MasterCard!
While we are heartened that the credit card associations, banks, their legal teams, advocacy groups and major media outlets are also regular readers of WayTooHigh.com, it is much more reaffirming that we are also visited each day by America’s largest multi-national conglomerates and small mom-and-pop stores.
Sunday’s Academy Awards telecast and MasterCard’s commercials will be a reminder that gimmicks and visibility do not trump the law and conviction of outrage by its cardholder and retailer customers. This Sunday, it’s the Academy Awards MasterCard commercials, then this Summer, during the Olympics, it will be Visa’s turn to spin their story.
During the 60-second MasterCard spots on Sunday’s Academy Awards, think of the single mom walking into a corner convenience store in the inner-city, rather than the planned MasterCard sweepstakes contest they will instead be promoting. Back to our profile: The mom walks in, buys a gallon of milk for cash and thus subsidizes the signature cardholder’s free trip to Europe from an identical purchase of milk because they paid with a premium signature MasterCard. The merchandise cost the same, but the interchange expense is shared by the cash paying shopper. Then, ask the question: why exactly is the person paying with cash subsidizing the frequent flier mileage gained from affinity cardholders? It would take an Academy Award performance to explain how that is a fair transaction.
Our readers are part of the reason we want to incite millions of merchants and consumers to stand up and say enough to the nearly $40 billion in hidden fees forced upon us by Visa, MasterCard and its member banks. There is no choice and there is no competition.
As a headline, this is an eye opener, but no surprise to us. Years ago, Mitch Goldstone spent a full day with Starbucks founder, Howard Schultz during a University of Southern California Marshall School Entrepreneur event. Mr. Schultz is one of our nation’s most admired and smartest entrepreneurs.
And, that is why this headline, that Starbucks is planning to regroup and *briefly close more than 7,000 coffeeshops at 5:30 pm on Feb 26 is smart management, and a brilliant media event.
The reason is to provide a refreshing training session to the 135,000 “store partners” [employees] across the U.S. to get the famed purveyors of much more than just selling coffee back on track. [click here for company press release].
OK, you must be asking, so what does this have to do with credit cards and interchange fees? Unlike ScanMyPhotos.com, where our average Ecommerce order is more than $150.00, think about the Starbucks business model. The average order must be just a few dollars. My order is $1.85 and I pay in cash.
Think of the interchange fees on credit and debit card transactions at Starbucks for micro-payments. If a customer spends about $2.00 and uses a Visa or MasterCard-branded debit card, there is a minimum fee to Starbucks; in our case, it is about .55 cents. Even credit card transactions are costly too.
A question is: why are Starbucks Cards free from interchange fees? After all they are using an electronic payment network that costs money to print, promote and operate the card program. In the case of Visa and MasterCard, may times the issuing and acquiring banks are the same, which means the four-party electronic payment network is on par with retailers’ internal gift card programs. There must be a degree of fraud (people were recording the authorization codes on the back of the cards and wiping out the balance on cards that were later validated). The banks plastic and Starbucks plastic are very similar, yet there are no interchange fees for gift and store cards.
Another question is: what would happen if Starbucks ceased accepting credit cards? Mr. Schultz is on of the most dynamic entrepreneurs in the nation and if he did the math and reviewed the annual interchange fees, a similar conclusion could arise. Sure, it is convenient to use plastic to pay for a cup of coffee, but most people (other than those watching the silly Visa commercials [click here]), would just as easily pay with cash to help Starbucks regain it entrepreneurial and storied edge. For the larger purchases of cappuccino machines, cards could be used.
PAPER OR PLASTIC?
The banks along with Visa and MasterCard are spending millions to entice consumers to insist on plastic. Starbucks and other merchants with many small individual transactions has fallen for this gimmick. But, as Starbucks prepares to regroup, we wonder if they will also reevaluate the cost and benefit of those hefty merchant interchange fees?
But, this is not to suggest that there is competition from other sources. In our case, if ScanMyPhotos.com were to terminate our credit card payment option, we would be out of business, as much of our revenues are derived from Ecommerce transactions and much higher per ticket in-store transactions which more require the use of charge cards. The two giant credit card associations control nearly 80% of that market.
We are huge fans of The Los Angeles Times‘ “Consumer Confidential” reporter, David Lazarus and regularly email him to extend our support for nearly every issue he addresses. Mr. Lazarus previously reported for The San Jose Mercury News, but is now one of the Times’ best assets; his feature often addresses and resolves important consumer concerns.
This is one time, however, which we are in disagreement, sort of. Today’s column [see link] asks why Federal Express and other courier services round up their shipping costs? The answer: effectively, because they can.
Our nationwide and international photo scanning service [ScanMyPhotos.com] is now comfortable with our partnership with FedEx and USPS’s pricing structures. Yes, we would like them not to round up the charges, especially if a box of photos weights 25.1 pounds and we are charged to ship a 26 lb box. But, as smart entrepreneurs, we take advantage of the added charge by adding extra treats to the order. To take full advantage, we add boxes of treats, like chocolates and other word-of-mouth marketing pleasures to dazzle our customers; after all, we are already paying for the added shipping weight.
The same is true with the U.S. Postal Service, and especially our co-branded U.S. Priority Flat-Rate boxes, which works in the other direction. Our orders can weight as much as 17 lbs and when sent to the furthest destination in the country could otherwise cost thirty-dollar and more, rather than our flat-rate cost of under nine-dollars [USPS rate increase is planned for May].
Mr. Lazarus is right and FedEx and the other carriers should study their rates and if enough consumers raise their voices, the more accurate pay-for-exact-measurement of each package might occur. The technology is there to charge for the exact weight. Even though, as Mr. Lazarus explains, “we live in an age of supercomputer-driven, lightning-fast digital technology that can determine the time of day down to a nanosecond,” other rates keep on rising. Electronic payment processing credit card transaction fees are still rising – some merchant interchange rates have soared more then 10-fold since 1999. Even though retailers like us no longer use the manual analog credit card imprinters, but rather the same super-fast telecommunication systems that is alluded to in today’s FedEx article.
What makes FedEx, UPS, USPS and other courier services different than MasterCard and Visa is that there are choices and there is competition.
I can choose not to use FedEx, but like all merchants, we are forced to accept Visa and MasterCard’s anticomptitive and unfair merchant interchange fees – which are three times the rate in the U.S. as in many European countries and only about 13% of the fees are cost-based. The interchange fee in Canada for PIN-based debit cards is zero and the interchange fee to process a manual handwritten check is also free, yet the nearly $40 billion in annual interchange fees forced on merchants and consumers is without regard to choice or competition.
Excerpt: “Merchants are upset over fees they must pay to credit-card companies on each transaction, known as interchange fees. The fees average about 2 percent of the total transaction, but business credit cards and rewards cards — which give card holders frequent-flier miles or cash back — charge merchants more.”
Click here to read the Burlington Free Press article by Dan McLean (Feb 17)
[WayTooHigh.com editors note. Yes, MasterCard and Visa do make their interchange fees available on their websites. MasterCard’s is 100 pages. Instead, we challenge any merchant to identify the exact cost for each electronic payment transaction. Even though a schedule of fees is posted on a website, it doesn’t diminish from the reality that the fees are obscured and hidden. Ask any consumer or merchant what the exact interchange fee was for each transaction was – at the time of purchase – and they will be hard-pressed to guess at the number. Until we are successful in our litigation, the person from the lobbying group [Electronic Payments Coalition] can answer why the exact interchange fee is not posted as a separate item on each transaction, just like how other taxes are separated and displayed on its own line item on each receipt? Then again, the welcome page to Electronic Payments Coalition explains they are “preserving competition” and “protecting choice,” – and it’s not even April Fool’s Day yet. Competition? Visa and MasterCard control about 80% of the entire electronic payment market. Choice? If ScanMyPhotos.comwere to cease accepting Visa and MasterCard payments our retail and Ecommerce business, like most companies, would be closed in a day. There is no choice and no competition when it comes to the unbridled cartel-like power wielded by the member banks and their two giant credit card associations.]
Unlike Visa’s TV ad campaigns, encouraging consumers to use their credit cards, adding to the billions in electronic payment fees, even on micro-transactions, MasterCard’s upcoming Academy Awards® commercials are a pleasant change.
The prior sweepstakes’ schemes precluded debit card and PIN-based transactions from participating in the one-in-a-gazillion chance of winning a prize. That was a cheap attempt to coerce the much lower interchange rate debit card transactions to be entered at the much higher credit card rate.
This time, on Oscar® night, viewers will view a new MasterCard Worldwide promotion which is open to everyone – no purchase is necessary.Now, if only the two leading credit card associations would open their eyes to the growing battle against their anticompetitive and collusive price-fixing charges.
According to The New York Times reporter Stuart Elliott, the TV and print campaign, called “Studious Pupil” will reward customers with priceless experiences.Each spot “ends by asking, ‘[a]re you searching for the priceless things in life?’”
A better question is asking whether the millions of MasterCard cardholders understand that each electronic transaction they make is anything but “priceless?”
There is a cost. Merchant interchange fees account for nearly a $40 billion annual hidden tax on consumers and retailers. Rather than taunting viewers at the Oscars with a one-in-a-gazillion chance of winning a painting or free meal, a more picture-perfect blockbuster would be to end their cartel over what we assert are illegal price-fixing tactics.
According to a Feb 15th AP article, “MasterCard International Inc. paid Sidley Austin LLP $680,000 in 2007 to lobby on a variety of Internet-related issues.”
Technology and innovations are generating nationwide buzz for our super-fast photo scanning and Ecommerce digital imaging services. Now, it’s free. ScanMyPhotos.com has pioneered super-fast and affordable photo scanning, and today it is free [see link for article].
We are scanning up to 1,000 4×6″ photos without charge (pay just for S&H – $19.95) for all members of Flickr, Facebook, MySpace and Blogger because Kodak technology is that efficient [see link to Kodak.com profile].
What does this have to do with out merchant interchange battle? Everything. Unlike MasterCard and Visa and its thousands of member banks, we are taking advantage of technology to lower costs. This model makes sense because ScanMyPhotos.com is asking members of these four leading social networking sites – representing the most cutting-edge and innovative group of consumers – to post reviews on their ScanMyPhotos.com experience.
If we can provide free and super-fast photo scanning, why can’t the two leading credit card associations also adjust their fees to also reflect today’s shared technological efficiencies for super-fast electronic payments?
A publicly filed Report and Recommendation on Feb 12 from Magistrate Judge James Orenstein is recommending to Judge Gleeson that the Court deny MasterCard’s motion to dismiss the Class Plaintiffs Supplemental Complaint that challenges MasterCard’s reorganization and IPO.
[Click here to view the Report and Recommendation].
In our opinion, as Class Plaintiff, this is a significant victory as it undermines MasterCard’s legal and business strategy of attempting to avoid antitrust liability by transforming itself into a “single entity” immune from Section I of the Sherman Act.
We have written in depth on this topic ever since MasterCard launched its plan to transfer liabilities through a questionable public offering.While there are other remedies beyond overturning the MasterCard IPO, the situation is similar to those now faced by Visa Inc and its nearly identical planned IPO, which we now think could be modified to address these issues and even be deferred or rescheduled. [See Risk Factors]. We expect that yesterday’s Report and Recommendation could minimally have a materially negative impact on Visa’s IPO pricing.
Selected highlights from the Report and Recommendation
Background: In their First Consolidated Amended Class Action Complaint, filed on April 24, 2006, the merchants and trade associations that comprise the Class Plaintiffs alleged sixteen antitrust claims against a variety of networks and banks arising from those defendants’ use of fees and rules that enable the merchants to accept credit and debit cards as forms of payments for the goods and services their customers purchase.
[T]he plaintiffs allege that the IPO fundamentally altered MasterCard’s structure and operations, as well as the relationships between and among itself and the Banks, in ways that offend federal antitrust laws as well as New York State’s prohibition against fraudulent conveyances.
Before the IPO, the banks that made up the membership of the MasterCard consortium completely controlled the network: they owned all of its shares and populated its Board of Directors and other governance committees.
The plaintiffs assert that it [the IPO] was to avoid such liability that MasterCard’s banks determined to transform the consortium into a public company that would qualify as a single entity; however, in doing so, the plaintiffs contend that the banks sought only to divest themselves of enough participation in MasterCard to avoid antitrust liability, without losing their ability to engage in anti-competitive conduct. Id. 74-75. In making that allegation, they note that MasterCard publicly described one expected advantage of the IPO as being insulated against “legal and regulatory challenges involving our ownership and governance.”
The Class Plaintiffs contend that the net effect of these changes is to create the appearance but not the reality of a single entity, and thereby improperly to insulate MasterCard from Section 1 liability for what amounts to a continuation of its member banks’ continued unreasonable horizontal restraints of commerce.
I conclude that the IPO resulted in both MasterCard and the Banks making an acquisition that is properly subject to scrutiny under Section 7. First, the Banks Acquired stock in the new MasterCard entity, and that acquisition is not shielded from liability simply because it was paid for with arguably more valuable shares of the old entity. Second, MasterCard acquired assets from the Banks – namely, their shares of the old MasterCard entity and certain associated rights – and that acquisition is not shielded from liability simply because the assets can also accurately be described as MasterCard’s own stock rather than “the stock … of another person
… [T]he plaintiffs assert that the rules governing transfers and ownership of the new classes of MasterCard shares will concentrate effective control of the new entity in the defendants’ hands. Those rules ensure that the banks that were members of the old MasterCard consortium will retain a substantial economic interest – 41 percent ownership – in the new entity. Combined with ten percent ownership share guaranteed to the new MasterCard Foundation, it is impossible for outsiders to obtain a majority stake in the company. In addition, the restrictions on governance rights – including the ownership qualifications and veto powers associated with Class M shares and the limitations on voting rights available to public investors – further ensure that no outsider can gain enough power to operate MasterCard in a way that might be more competitive but less profitable for the banks.
… Given the plaintiffs’ plausible allegations about the characteristics of the relevant market and the effects of the acquisitions at issue, I conclude that the Complaint sufficiently pleads that the agreements leading to the IPO will probably result in a substantial lessening of competition. Combined with my earlier conclusion about the form of the acquisition, I further conclude that – with respect to both MasterCard’s alleged acquisition of assets from its member banks and the Banks’ acquisition of stock in MasterCard – the plaintiffs have identified, if not yet sufficiently pleaded, a viable claim under Section 7 of the Clayton Act.
“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
During a recent review of our monthly merchant interchange fee statements, much of the info is beyond confusing, but one category we did notice was the charge for a standard debit card fees, which was about 55-cents, while a charge for a MasterCard business credit card was a variable fee of about 2.6% of the sale. Do the math and you quickly recognize that Visa and MasterCard, along with the acquiring and issuing banks are major partners in nearly every business.
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.
Last week, we went back for the second time to see Cirque du Soleil’s “Love” at The Mirage in Las Vegas. The performance is extraordinary, as are the ticket pices. For second row, the tickets cost $150.00 each, plus a $15.00 “L.E.T” fee. We think that stands for a “Live Entertainment Tax” which is an extra charge, much like a “convenience charge” that applies to Ticket Master-type costs.
This got us to thinking about our previous mentions [see link] to have the exact interchange fee posted on every debit and credit card transaction.
If Las Vegas can post the exact “L.E.T” extra fee and print it on each ticket, why are Visa and MasterCard so protective of hiding their merchant interchange fees?
Due to our participation at the International Photo Marketing Association convention in Las Vegas, we are preoccupied with several speeches we are presenting at the DIMA and PMA conventions (www.Pmai.org)
However, it was rewarding to receive absolute encouragement in our battle from other retailers who saluted and applauded our campaign to take on Visa and MasterCard’s anti-competitive pricing structure. Even at a luncheon today, sitting next to a photo industry executive from England, who we met during our speech there last September, they too shared our fight, even though the rates they pay are just half that in the U.S.
PMA this year is all about technology and innovations to lower prices, which shines more light on the question of how the banks and Visa and MasterCard could continue charging such high fees even tough technology should have led to lower rates?
Unlike Visa and MasterCard, the Eastman Kodak Company just earned raves from us due to its commitment to lower fees, raise efficiencies and create an entirely new business model to prove they are the world’s leaders in photo imaging. More information will be announced as early as this week in Las Vegas during the International Photo Marketing Association convention. Mitch Goldstone, from 30 Minute Photos Etc. and ScanMyPhotos.com [lead plaintiff in the merchant interchange litigation and co-editor of WayTooHigh.com] will again be addressing two sessions at PMA and DIMA.
If Kodak can reform its entire business model and cause us to loudly applaud, imagine if other businesses were to mirror their lead and also put their customers first?
ScanMyPhotos.com [30 Minute Photos Etc.] is doing the inverse and not replicating Visa and MasterCard’s business model. We use technology and innovations to constantly help provide more value to our customers around the world (rather than to member banks around the world) and we lower prices. Our pricing is so low that we receive calls every day asking how we can charge so much less then anyone else. It helps that we were the entrepreneurs who pioneered this new technology and helped commercialize Kodak document imaging scanners for photo industry applications and, just like the speed of transacting an electronic credit card payment , we too are super fast – 1,000 pictures digitally scanned in 10-minutes. See Kodak.com profile.
For regular updates on ScanMyPhotos.com and our daily tip and updates on super-fast photo scanning and digital imaging, read our other blog, Tales from the World of Photo Scanning, click here. On our most recent update, we even have very favorable comments on another large, non-financial services company.
It is interesting that since our litigation, the rate of record interchange fee hikes seem to have somewhat mellowed. While that is a good start, why exactly were they consistantly rising prior to our litigation and how was that justified as technology and efficiencies should have helped lower fees?
Unlike the fee structure of interchange rates, it is transparent that the named defendants along with their legal and advocacy teams are regularly reading WayTooHigh.com, yet, they remain nearly silent on many issues.
So, let us step back and remember the history of technology. Whatever happened to the millions of manual typewriters? How about the IBM Selectric typewriters – which were the staple for most offices just decades ago? The same question can be directed towards the manual credit card imprinters and multi-paged carbon copy paper payment receipts? Our company, ScanMyPhotos.com, still has a manual imprinter that we use to demonstrate how unfair these fees are. See this article with photo.
Both typewriters and manual credit card imprinters are nearly obsolete.
Today, you can buy a keypad for your computer for a couple of dollars on EBay, but only the Smithsonian in Washington is interested in those antiquated manual credit card imprinters. They all served a purpose, back when interchange fees were cost-based, but, one part is still around. The merchant payment system is still with us, and now amounts to a nearly $40 billion annual hidden tax that few retailers or consumers even understand.
Today, as the banks continue reporting dismal profits, due to the housing sub prime mortgage fiasco and other egregious mismanagement, the interchange boondoggle continues to fill an otherwise failing levee of corporate wretchedness. If it was not for the political and massive financial might of the banking industry (its member banks jointly owned Visa® and MasterCard®), these fees would have nearly disappeared.
Just as how the health care industry got a kick in the head after Michael Moore’s film “Sicko,” perhaps that is what Visa and MasterCard needs too.
Today, due to extraordinary political and economic schemes and collusion, the interchange rates in the U.S. are more than double, and often even more than that of collections in other, economically and technologically less developed nations.
Today, their market power is desperately grasping to hold on to these fees, especially when their other sources of revenues are being threatened.
Today, just as the Selectric typewriter and other ancient-like products abdicated to new technologies and innovations, we still have confidence that businesses and consumers will soon wake up and recognize that the banks’ electronic payment system are also relics; built on what we assert are illegal, price-fixing schemes to fill their vaults with billions of dollars that are being misdirected due to their absolute market power and price-fixing by agreement.
Whether it is forcing credit card paying motorists to toss over upwards of nearly two-percent of the total cost of a fill-up, to demanding that an inner-city mom, shopping at her local convenience store for a gallon of milk is helping to subsidize the premium affinity cardholders’ free mileage trip to the tropics, this must come to an end.
During the previous nearly [940] postings by WayTooHigh.com over the past nearly three years, we have provided news, commentary and updates on what we assert is an extraordinary conspiracy by the Visa and MasterCard associations to wield their market power to fix the price of credit card interchange fees.
Visa is wrong.MasterCard is wrong.
And, their member banks are wrong.
To quote from the movie “Network,” the payments network has enraged merchants, who, like us are mad a hell and are not going to take it any more
We came across this threadon FlyerTalk’s online bulletin board forum about service charges at restaurants. Readers commented on how some restaurants add a service charge which patrons might not notice, and then double the tip.
When compared to the nearly $40 billion in interchange fees that Visa and MasterCard’s member banks are still able to charge, this situation is tempered, but helps draw attention to a variety of hidden fee tricks. In the case of restaurant guests, when the bill comes they can carefully review and choose whether to leave an added tip, but for all electronic payment transactions, merchants and cardholders are invisible in the process and are forced to pay what few understand. From prior postings, we asked why Visa and MasterCard have not implemented out simplified receipt solution, by printing the exact interchange fee on every receipt? Click here for more info.
Click here to read the entire FlyerTalk forum thread
WayTooHigh.com: The Credit Card Interchange Report, is edited by Mitch Goldstone, co-founder of California-based ScanMyPhotos.com, the international online photo preservation service.
Goldstone and co-owner, Carl Berman are also the lead plaintiffs and class representatives in a antitrust class-action litigation against Visa, MasterCard and major banks that was filed in 2005.
This informational web site was created to provide news and commentary updates only. None of the information posted on WayTooHigh.com is intended to constitute legal arguments; it reflects only the opinions of its co-editors and not of any other plaintiffs or other parties involved in the merchant antitrust litigation. The information is not guaranteed to be correct, complete, or current. We make no warranty, express or implied, about the accuracy or reliability of the information posted by WayTooHigh.com or at any other Web site to which this site is linked. (c) 2010
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and Target pick up the phone, Capitol Hill starts to move. That is why MasterCard shareholders and future Visa shareholders need to pay attention. If Washington (or should I say Wal-Mart and Target) gets its way, credit card industry revenues will be slashed.”
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