You Have to Hand it to MasterCard’s Spokesperson, Sharon Gamsin

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.

Click here to read the article.

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?

 

Visa and MasterCard’s Interchangee Fee “Adjustments”

[UPDATE, original post on April 1st]

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.

MasterCard U.S. and Interregional Interchange Rate Programs

Assault on Visa and MasterCard’s Merchant Fees Escalates in the WSJ

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.

• Merchants Must Submit To MasterCard’s Power
  WSJ, January 10, 2008; Page A13

  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
  ————————————————-

• 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
  ——————————————–

• 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.
  ——————————————-

• 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

Mitch Goldstone
Co-Editor – WayTooHigh.com – The Credit Card Interchange Report Excerpts from The Wall Street Journal, April 3, 2008

Is Citigroup’s Credit Card Business Restructing an Attempt to Hedge Bank from Antitrust Liability?

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? 

“Visa’s IPO Is Worth a Close Reading” (via WSJ)

Herb Greenberg reports in The Wall Street Journal on March 22 [Page A11, subscription required] on what we have long been mentioning – The Visa IPO risk factors. 

Unfortunately, it wasn’t until after the drunken jubilation subsided that investors are beginning to understand what is at stake.  We posted the Visa Inc. SEC filing and risk factors on Dec 22.  Why was the media as negligent as investment advisers and underwriters in better not explaining the facts behind the largest IPO in our nation’s history?  Was it greed, or the rush to get the deal done at all costs.  Now that the party is over and that window of opportunity to complete the IPO is sealed, sobriety comes in a few weeks, when the billions in Federal Reserve loans are called.   

Click here to read the Herb Greenberg WSJ article.

Excerpts:

• “Investors generally overlook “risk factors,” as they are called. These can be found in all IPO prospectuses and 10-K annual reports filed with the Securities and Exchange Commission. This is where the company is supposed to bend over backwards to tell you where the booby traps might be.”
• “Much of it is boilerplate, but Visa’s warnings go beyond mere boilerplate to some specific issues that could very well spook investors if and when they ever make it into the headlines.  Consider, for example, that the first eight pages of its risk factors are devoted to legal and regulatory matters. Most companies usually start with business risks, but with Visa — and MasterCard — the lawyers (and some politicians) have had a field day.  Perhaps the stickiest concern has to do with lawsuits, as Visa puts it, over the amount of money the credit-card companies charge merchants.”
  
• What is the Federal Reserve’s Role in the Visa IPO?
  
• How the Fed’s $200-Billion Intervention Indirectly Boosts Visa’s IPO Valuation
  
•  Why Should The Public Bail Out Visa and the Banks? 

Visa Inc. Files 10-K Annual Report, Amends S-1 Registration
key point: “Failure to successfully defend or settle the interchange litigation would result in liability that to the extent not covered by our retrospective responsibility plan could have a material adverse effect on our results of operations, financial condition and cash flows, or, in certain circumstances, even cause us to become insolvent.” 

“Visa: Bailing Out The Banks” (NY Times)

“Should You Join the Visa IPO Craze?” (via Charlotte Observer)

Visa Inc. IPO Largest in US History; First it was 5, then 10 and Now $18.8 Billion – That’s Some Rich Valuation Appreciation

Visa’s Inc’s $10,000,000,000 Misguided Hedge From Litigation (WayTooHigh.com)

Understanding the Word “Insolvency” Is Crystal Clear

Thousands of Banks Pin Hopes on Visa Inc. to Bail Them Out

“Significant Victory” Announced Against MasterCard by Class Plantiffs

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

Visa and MasterCard: Redesigning the Credit Card Slips

Sell advertisements on all credit and debit card receipts.

Today’s advanced technological innovations enable personalized printing on nearly everything, so how about on credit card receipts too? 

As Visa and MasterCard are regular readers of WayTooHigh.com – The Credit Card Interchange Report, it will be interesting to see how they respond.

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 more info.

Riddle: What’s The Difference Between The Cost To Send An Email And An Electronic Payment? $40 billion each year!

Interchange Fees: Casualties of Technology?

Seventy-two pages, five-pages or one line?

Why Not Post Exact Interchange Fee on Receipts?

“Why the Visa IPO is So Hot” (via MSN: MoneyBlog)

Click here to read Anthony Mirhaydari’s report in MSN’s MoneyBlog)

Excerpt:

• “…And there are some legal issues too: Since 2003, for every dollar of revenue Visa generated, 28 cents was paid out in settlements. Most of the litigation centers on the interchange rates Visa charges to merchants on each transaction and various other antitrust issues.”

Shareholders Take Visa; Banks Run With $10,000,000,000 Payday

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.

“At Stake is More Than $50 Billion if the Merchants are Successful” (Legal Times)

Visa Inc. IPO Valuation – $74 a share?

“[B]anks Also Stand to Shed Some Liability” (The Charlotte Observer)

“Visa’s Lucrative House of Cards” (SF Chronicle)

Twilight Zone: The Movie, Visa and MasterCard Style

UnfairCreditCardFees.com

Visa Inc. IPO Largest in US History; First it was 5, then 10 and Now $18.8 Billion – That’s Some Rich Valuation Appreciation

“Significant Victory” Announced Against MasterCard by Class Plantiffs

 “Visa’s initial offering expected to fetch $5-billion”

Visa’s Inc’s $10,000,000,000 Misguided Hedge From Litigation

“Visa’s IPO Use of Proceeds Plan and Interchange Overview

Visa Inc. Files 10-K Annual Report, Amends S-1 Registration

How the Fed’s $200-Billion Intervention Indirectly Boosts Visa’s IPO Valuation

“Will Visa IPO Deter Antitrust Lawsuits?” (Financial Week)

“IPO View – Visa IPO Hit by Unexpected Snag–Recession Fears” (Reuters)

—————————————————————– 

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

Visa, Inc. Due Diligence: Have Investors Talked With Merchants?

After reading the Visa, Inc. IPO Risk Factors, we wonder whether investors will actually stop by and talk with the millions of merchants, companies and organizations which are forced to accept MasterCard and Visa – the two control a whopping 80% market share of all electronic payment processing solutions.  For us, the key word is “Interchange” and the below thousand plus news and commentary postings by WayTooHigh.com provides just the start.

Visa and MasterCard Adjusting Interchange Rates

“Visa, Inc. FORM S-4 SEC Registration Statement” (click here to view the SEC filing)

———————————————————- 

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

Visa and MasterCard Adjusting Interchange Rates – Part II

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. 

Visa and MasterCard Interchange Rates Revised on April 1

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

Visa and MasterCard Interchange Rates Revised on April 1

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.

News Update From ScanMyPhotos.com

To help personalize and put a face on interchange fee issues, it’s useful to know the companies that are impacted by the merchant interchange fees.  Like nearly every Ecommerce business, our company’s online orders are 100% reliant on electronic payment processing.  For background on our company, click here to view recent news about ScanMyPhotos.com. For daily updates see our blog: Tales from the World of Photo Scanning.

“Should You Join the Visa IPO Craze?” (via Charlotte Observer)

Click here to read the Sunday, March 2, article in The Charlotte Observer. 

It included a listing of considerations before investing in the pending Visa IPO which was written by reporter Christina Rexrode, but was absent of a giant risk factor.  Among the pros and cons, there was no mention of the merchant interchange litigation with threatens the continued operation of the giant credit card association, and as described in its SEC filing, might lead to insolvency. 

Read the below 998 WayTooHigh.com posting for more reasons why this might not be the smartest of investments, other than for the thousands of banks which are racing to bail out.

President Bush Isn’t Aware of $4-a-gallon Gas, But We Are

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. 

Click here to view video 

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:

1. Why are the banks still able to get upwards of 1.7% for each charge? 
   
2. 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?

____________________________________________________

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

What Do Visa and AT&T Have in Common?

While financial writers are explaining that the planned Visa Inc. IPO will be nearly double that previously all-time high public offering by AT&T.  There is also something much more ominous that the two have in common and should not be overlooked.  Our antitrust litigation against Visa, MasterCard and major banks is also the largest antitrust case since the AT&T breakup; not very good company to keep.

Some talk by the financial media suggests that the thousands of banks which co-own Visa might be hoping for a multi-billion dollar settlement [they are planning to hold $3 billion in reserves].  But, the much larger payout is the $40 billion in annual merchant interchange fees that consumers and merchants are forced to pay.  We think any settlement will include either the termination of or significant reduction in these obsolete electronic payment fees, and thus even more billions in revenues that would no longer be sent to the banks, but rather retained by American consumers.

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

A Look into Visa’s Trojan Horse IPO Scheme

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.

  

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

Interchange Fees: Do the Math, but it Makes no Sense

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. 

Presidential-Sized Prediction

From Visa’s sponsorship of the Olympics to its contrived IPO in 2008, we are closely monitoring the company’s influences.

Global interest is also brewing to further expose our illegal price-fixing complaints and demand for monumental reforms at the credit card giant and by its co-defendants who also use the antiquated electronic payment network of supracompetitive fees to strangle the world’s economy.

As U.S. presidential candidates are seeking to restrain the oil cartel’s power, they should wisely do the same with the bank-controlled merchant interchange fees.  Beyond the banks lobbyists and hefty political contributions, they would win over many more votes from ordinary consumer-citizens. 

Forty-billion dollar each year flowing out of our economy to help fund the banks other fiscal quagmires is defiant to the principles of fair competition.

In 2008, Interchange fees should be abolished and penalties assessed for the years of multibillion dollar price-fixing violations.  The banks’ multibillion dollar hidden tax scheme on retailers and consumers is obsolete.  Technology and economic efficiencies today should hasten the removal of these fees.

Visa and MasterCard staffers and paid advocacy supporters may suggest it is not a “hidden fee,” because they now post a matrix of multi-page schedules and conditions on their websites.  But, what is crystal clear is that the world’s retailers, large and small, are against these unwarranted fees.  We are your core customers and even though you have an extraordinary 80% market power, it is time you listened.

More and more consumers are beginning to understand why it makes no sense to impose 1%, 2% and more in revenue sharing from each credit card transaction. Why nations that are technologically less developed than the U.S. pays a quarter or a third the rates charged in the States.

With nearly 900 previous news and commentary postings, WayTooHigh.com is pleased that the scope of our readership is global and we hope this projection is accurate.

[Commentary: WayTooHigh.com]

Good Thing MasterCard Worldwide Has An “Integrity Officer” On Staff

Reaction to the Dec 28 Wall Street Journal Letter to the Editor by MasterCard Worldwide’s Integrity Officer.

The EU has found, again, that interchange fees charged by MasterCard to merchants are fixed at anticompetitive levels.  These are the same findings that have been made by the Reserve Bank of Australia, the United Kingdom Office of Fair Trading, and every other investigation by a government enforcement agency.  In his demonstrably incorrect response, Joshua Peirez of MasterCard Worldwide [“EU Killing of Interchange Fees Won’t Help Customers” Letters to the Editor, Dec 28] minimally provides a twinkle of whimsy corporate-speak.  Instead of recognizing that the nearly $40 billion annual hidden tax on merchants and consumers is based on illegal price-fixing, he hauled out the usual replies.

The fact is that consumers, the market place and technology, not interchange fees are what forces innovations within the electronic payment network.  The actual cost to transact 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 anticomptitive price-fixing corrupts their understanding of economics 101, where the marketplace controls competition, not a board of directors who stand accused of illegal price-fixing.  Of course prices will be lowered once the nearly 2% forced interchange fees are removed.  In Australia, England and Canada, and in other countries where rates are much lower than in the U.S., the credit card networks are working fine.  [Canada has no interchange fees on PIN-based debit cards].  If it was not gargantuanly profitable, MasterCard and Visa would have pulled out of those markets, and they surely have not.

As for card benefits, study the endless grouping of fees that MasterCard and Visa charge.  For instance, when an affinity frequent-flyer signature card is used, merchants are also taken on a ride.  The interchange fees on those cards are even higher than other categories.

Interchange fees were established in the early 1970s in order to compensate card-issuing banks for the cost of issuing and maintaining credit card accounts. It was designed when merchants had to use bulky manual credit card imprinters and stacks of thick carbon copy receipts that were mailed away for processing.  The check processing system in the United States manages the clearing the billions of paper checks that speed along that system, all without any interchange fees. 

Over the years, the interchange fees charged by Visa and MasterCard have been a multi–billion dollar tool to generate revenues from non-cost based transactions.   While Visa and MasterCard have a history of scorched-earth litigation and are mounting a vigorous public relations battle against its core customers, merchants and cardholders, merchants and consumers continue to challenge their every move.   We understand that competition exists solely for card issuers in the form of ever increasing interchange fees.  The nearly $40 billion annual hidden tax on merchants and consumers is the result of a broken and we are immovable in our commitment to fixing this unjust burden

[Commentary: WayTooHigh.com, in response to The Wall Street Journal “EU Killing of Interchange Fees Won’t Help Customers” Letters to the Editor, Dec 28. See link].

Is MasterCard Intentionally Misleading Or Was The Credit Card Giant Misquoted?

See the below Buffalo First Business posting [link].  According to a comment by MasterCard Worldwide’s communications VP, Sharon Gamsin in today’s article about the card association’s interchange fees at service stations, she is wrong.  And, we know it.  According to the article she was reported to have said, “merchants don’t directly pay interchange fees, and these rates can be negotiated with their banks.”

Really now?

Fact. Interchange fees cannot be negotiated. The rates are so confusing, it takes MasterCard more than 100+ pages to post its fee schedule on the Internet.  The game is that Visa and MasterCard both don’t get the interchange fees. Well, someone is.  At $40,000,000,000 [that’s billion] each year, it certainly isn’t going into a piggy-bank. The fact is that until MasterCard and now Visa restructured their companies, the member banks owned both companies. Bank of America owned Visa and they owned MasterCard, for instance.  The member banks still own a near majority of MasterCard, even after the IPO.  Even with an independent board representation, our litigation goes back years and calls into question the many years that the two card associations were owned by the banks.  

Recap.  Yes! MasterCard does make money from interchange fees. They earn a percent from each transaction.  No! merchants are unable to negotiate their merchant interchange fees, and I challenge any WayTooHigh.com reader to find retailers who know exactly what their customers just paid in each single interchange transaction.  [see fee schedule].  Yes! merchants do pay interchange fees; I write out a check each month for it.  The game Ms. Gamsin is playing is that I write a check out to Chase Paymentech, not directly to MasterCard.  But, guess who still gets it’s cut.  If MasterCard didn’t earn interchange fees its stock wouldn’t be north of $200. Either way, guess who owns the largest payment processing company: Chase, as in JPMorgan Chase, one of the named defendants in the Merchant Interchange litigation, which is a co-owner of MasterCard and Visa. It’s a big circle of greed.

[commentary: WayTooHigh.com]

Even More Hidden Credit Card Fees

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

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

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

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

[Commentary: WayTooHigh.com]