You just have to watch this how-to video. The key facts about illegal antitrust price-fixing are omitted, as are the reasons why merchant interchange fees in the U.S. are upwards of six-times what other industrialized nations pay. Remember, this video and the organization promoting it is funded by the banks and Visa and MasterCard.
The problem is that few understand what these fees are; it is a hidden tax on consumers – amounting to upwards of $48 billion in anticompetitive charges each year. As proof, since this video was posted, only about 450 people viewed it, which my guess was largely from those who produced it.
Click here to read the recent report profiling interchange merchant interchange fees rates. U.S. credit card interchange fees ~2X rates in UK, New Zealand. ~4X rates in Australia. ~6X cross border MasterCard rates in the EU
“Not only do other nations provide lower interchange rates, but we can also learn from other countries’ experiences with interchange reform. Major countries around the world have addressed interchange reform, with some already demonstrating beneficial results for their economies. In particular, lessons learned from experiences in Australia, New Zealand, Canada, and the European Union, provide instructive examples about why interchange reform makes economic sense in the U.S. – especially now.”
WASHINGTON, July 17, 2008 /PRNewswire-USNewswire via COMTEX/ — Credit Card Fair Fee Act Would Mean Free Market Transparency, End Card Price Fixing
The retail community welcomed the House Judiciary Committee’s passage of the “Credit Card Fair Fee Act” of 2008 (H.R. 5546) with the support of virtually equal numbers of Republicans and Democrats.
“The days when Visa and MasterCard are able to impose exorbitant fees on consumers are numbered. Now that Congress and the public are learning how credit card fees are driving up the price of gas, food and other necessities, the big credit card companies are in for a very rough ride,” said Richard Oneslager, Chairman, National Association of Convenience Stores (NACS), a member of the Merchants Payments Coalition.
Interchange fees amount to approximately $2 of every $100 spent using credit cards. Credit card interchange fees cost Americans $42 billion last year and inflate the cost of virtually all retail goods, but especially skyrocketing food and gasoline prices. Currently, credit card interchange rates are set in secret, hidden from view, and exclude merchants from the negotiating process.
“From the cost of groceries to the cost of gasoline, working families are feeling the pain in their wallets,” said John Motley, Senior Vice President, Government and Public Affairs, the Food Marketing Institute (FMI), an MPC member. “The abuse of American consumers and businesses by credit card companies and big banks with a hidden fee that drives up the cost of every retail item needs to end.”
The Credit Card Fair Fee Act will allow merchants for the first time to be included in the negotiating process with Visa and MasterCard, separately with their banks, to come up with a voluntary agreement on interchange rates and terms.
“On behalf of our retail members and their customers, NACS applauds Chairman John Conyers and the Republicans and Democrats of the House Judiciary Committee who stood together today to pass H.R. 5546, the Credit Card Fair Fee Act,” said Oneslager. “This strong show of bipartisanship vindicates the efforts of thousands of NACS members that have taken the issue of outrageous credit card fees and practices to Congress. We look forward to similar bi-partisan support by the full House and Senate.”
The Merchants Payments Coalition (MPC), UnfairCreditCardFees.com, is a group of retailers, supermarkets, drug stores, convenience stores, fuel stations, on-line merchants and other businesses who are fighting against unfair credit card fees and fighting for a more competitive and transparent card system that works better for consumers and merchants alike. The coalition’s member associations collectively represent about 2.7 million stores with approximately 50 million employees. For further information, please visit www.unfaircreditcardfees.com.
WASHINGTON, June 27 MPC-Visa-fee-cuts Credit Card Fees on Gasoline Might Actually Be Higher, Not Lower, Under New Visa Program
WASHINGTON, June 27 /PRNewswire-USNewswire/ — Visa’s announcement yesterday regarding new interchange policies on gasoline sales shows that interchange fees raise gas prices, but it’s not clear what else the announcement means. If Visa is willing to admit that interchange fees are causing added pain at the pump, why won’t it admit its role in rising food and other consumer prices? Interchange fees cost Americans $42 billion last year – more than all other credit card fees combined. It inflates the cost of nearly everything consumers purchase whether they pay with plastic or cash.”While the devil is always in the details and we haven’t seen any details yet, it looks like the new structure for credit cards combines a higher fixed fee with a lower percentage fee,” said Hank Armour, President and CEO of the National Association of Convenience Stores. “The net result of this combination may actually be higher fees for those transactions under $60 for those customers using regular Visa credit cards without a rewards program.”
On debit card transactions, the cap on interchange may only apply to gasoline purchases of more than $97.50. That is a small number of transactions – especially because Visa banks reserve the right not to give gasoline retailers anything more than $75 on a sale.
Unfortunately, we may not know the impact for months because Visa has said this will only affect debit card transactions on gasoline in mid-July and won’t affect credit card transactions until October – long after the end of the summer driving season (and the opportunity for Congressional action).
While we welcome ANY recognition by Visa of the interchange fee pain, the confusion and potential negative effects of these changes might have been avoided if this were the result of a negotiation between merchants and Visa. H.R. 5546 and S. 3086, the Credit Card Fair Fee Act, would allow that to happen and ensure a market process for interchange fees with benefits to consumers throughout the country. Visa and MasterCard have a collective 80-plus percent market share and that gives them a stranglehold on retailers. The legislation would counteract that problem. Currently, rates are set in secret and the process is hidden making it practically impossible for retailers and consumers to know how much they are really paying in credit card fees, or why.
The Merchants Payments Coalition (MPC), UnfairCreditCardFees.com, is a group of retailers, supermarkets, drug stores, convenience stores, fuel stations, on-line merchants and other businesses who are fighting against unfair credit card fees and fighting for a more competitive and transparent card system that works better for consumers and merchants alike. The coalition’s member associations collectively represent about 2.7 million stores with approximately 50 million employees. For further information, please visit
WayTooHigh.com – The Credit Card Interchange Report Comments:
Even financial interpreter Jim Cramer is in for a grueling week as Visa and MasterCard readies for what both companies warn might lead to their “insolvency” [according to their SEC filing statements].For an update on Thursday’s planned Capital Hill combat against the giant credit card associations and its member banks, click here to read Jessica Holzer’s May 12thThe Hill column.
You know there are splinters in Visa and MasterCard’s haywired argument when lobbyists for the banks and the credit unions join forces; while they are gasping, we are ready to further illuminate the issues. It has been more than three-years since launching the class-action complaint to arrest this $40 billion annual hidden tax on merchants and consumers.
Let us not forgot that interchange fees were designed decades ago to cover the cost of a four-party electronic payment network – back when we used manual credit card imprinters and mailed in thick bundles of carbon copy credit card receipts to clear the payments. Back then, it took days to transfer funds, today it is instant and efficient.
Today’s efficiencies have done away with the antiquated payment process, yet the fees are higher than ever. Why the disparity as interchange rates abroad are a fraction of the nearly 2.0% tax charged in the U.S.?
This is the “perfect storm.”
We are ready to explain why interchange fees are obsolete, illegal and anti-competitive. Even the banking industry’s shareholders are in for another bombshell so audible and eclipsing that the impact from their executive’s round of previously misfortunate decisions and billions in prior writeoffs may be petite in comparison. A trial by jury allows fort trebled damages.
When was the last time you heard the U.S. Federal Reserve explain that interchange fees “dampen innovation” for check writing? Never: there are no interchange fees to clear checks. Likewise, why hasn’t the Fed explained that merchants “derive huge benefits” from accepting paper checks for payment? Again, there are no fees to clear a check and if it is so significant a cost, why hasn’t the banking industry demanded interchange fees for that payment form?
The banking lobbyists are ready and so are we, but our story is being told by regular shop owners to personalize the issue. After years of toil, merchants and consumers are at the cusp of forcing the demise of these unbridled and unnecessary interchange fees on American’s and our neighbors around the world. The American public is fed up with the banking industry’s mismanagement and audacity; the days of cartel-like price-fixing will vanish, just as did those bulky manual credit card imprinters also disappear.
Merchants do not have a “wonderful relationship” with Visa and MasterCard. Fact is we are suing them for what could amount to hundreds of billions of dollars in antitrust violations.
There is no transparency for inter interchange fees. Ask any merchant what any single electronic payment transaction was. If Visa and MasterCard want transparency, post the exact charge on every credit card receipt. Posting upwards of one-hundred pages on their website with encrypted interchange fee codes is not transparent.
Consumers do not know that they are being charged nearly 2% in interchange fees.
Interchange fees are illegally set by Visa, MasterCard and its member banks. This is illegal and identical to what the railroads did in the 1800s which forced the creation of the Sherman Antitrust act.
There is no competition. Visa and MasterCard control 80% of the entire electronic payment network. The fees are not competitive, any more than OPEC is competitive with its similar cartel-like pricing.
The National Restaurant Association today applauded the Credit Card Fair Fee Act, legislation introduced last week by U.S. House Judiciary Committee Chairman John Conyers (D-MI) and Rep. Chris Cannon (R-UT). The bipartisan legislation will allow large and small businesses to negotiate directly with credit card companies in an effort to reduce the artificially high credit card interchange fees.
“Many of our members have expressed concern about the unexplained increases in fees and inability to negotiate a fairer rate with credit card companies. The Credit Card Fair Fee Act is a solution to an issue that poses a burden to small businesses, including restaurants, across the country,” said John Gay, senior vice president of government affairs and public policy for the National Restaurant Association.
Interchange fees are meant to cover the cost of processing a credit card transaction and the risk taken by the issuing bank that it will be repaid. However, reports show that the cost of processing is steadily decreasing in the United States, while fees continue to rise. The result appears to be an increase in revenue for the card issuer and a drain on a business’s bottom lines. Interchange fees amount to approximately $2 of every $100 spent using credit cards.
Over the last three years, unfair credit card practices, policies and fees have been scrutinized by the public, consumer groups, the Federal Reserve and Congress. Interchange fees have been the subject of hearings three times in recent years under both Republican and Democratic Congresses.
Last July, the House Judiciary Antitrust Task Force Subcommittee conducted a hearing on the lack of competition in the credit card marketplace. The Credit Card Fair Fee Act is a direct outgrowth of the Antitrust Task Force’s bi-partisan examination into the fees, policies, and practices of the credit card industry.
The National Restaurant Association is a member of the Merchants Payments Coalition (MPC), a group of retailers, supermarkets, drug stores, convenience stores, fuel stations, on-line merchants and other businesses who are fighting against unfair credit card fees and fighting for a more competitive and transparent card system that works better for consumers and merchants alike. The coalition’s member associations collectively represent about 2.7 million stores with approximately 50 million employees. For further information, please visit www.unfaircreditcardfees.com.
[Click here to view MasterCard Worldwide press release. Reprinted in its entirety].
Purchase, NY, March 06, 2008 – The electronic payments system benefits merchants and consumers because it is a highly efficient and secure way to increase sales and consumer satisfaction. The system was developed in the highly competitive marketplace of merchants, banks, payment networks and consumers. This legislation is an attempt by merchants and the Merchants Payments Coalition to put in place price controls, which will harm competition and the card products and services offered to consumers.
MasterCard believes there is no need for government intervention, and that it would be inappropriate for the U.S. government to set prices and negotiate the terms of contracts for private commercial entities. Such policy decisions in the past have proven to be unworkable, unpopular and detrimental to the free market economy. There is no evidence that demonstrates that such price controls will result in savings passed along to consumers. To the contrary, we believe such moves negatively impact consumer choice.
We will continue to work with our customers and other industry organizations, like the Electronic Payments Coalition, American Bankers Association, National Association of Federal Credit Unions, Independent Community Bankers of America, and the American Financial Services Association, to help members of Congress enhance their understanding of how interchange brings benefits to millions of consumers and merchants around the world.
According to American Banker reporter Stacy Kaper (Thurs, Feb 21) “Interchange Limits Heat Up on Hill; Conyers, Durbin draft bills giving retailers more sway over fees.”
Key points extracted from the American Banker article, include:
House and Senate Judiciary committee leaders are drafting legislation that would limit interchange fees.
The credit card industry is already under siege by lawmakers who want to rein in various practices, but a crackdown on interchange fees would be a first at the federal level and could threaten an estimated $36 billion in annual revenue for the industry.
House Judiciary Committee Chairman John Conyers is expected to offer an interchange bill with Rep. Chris Cannon, R-Utah.
According to a draft of the bill, it would create a three-member board of lawyers appointed by the Federal Trade Commission and the Justice Department to regulate interchange rates.
Senate leaders are considering offering a similar measure
The legislative push is the result of work by the Merchant Payment Coalition — a retailers’ lobbying group fighting to reduce the merchant discount fees from which interchange fees are derived.
Because “there is no competition between the thousands of rival banks participating in a given electronic payment system regarding these fees and rules, merchants are denied access to the electronic payment system on rates and terms that would have been negotiated in a perfectly competitive marketplace,” the draft bill says.
A sweeping credit card reform bill introduced this month by House Financial Services Committee leaders Barney Frank and Carolyn Maloney would require the Federal Reserve Board to make annual reports to Congress on how much banks earn from merchant fees.
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.]
U.S. Groups Opposed to Unfair Credit Card Fees Applaud Ruling, Urge Congressional Action Here
[Merchants Payments Coalition, news release] Washington, D.C. – December 19, 2007 – Today a coalition of U.S. merchants opposed to unfair credit card fees (unfaircreditcardfees.com) welcomed a ruling by the European Union (EU) Competition Commission that MasterCard’s credit card interchange fees for consumers must be cut across the 26 member nations of the European community.
Calling the MasterCard credit card interchange fee system illegal and an unfair burden on European consumers and merchants, EU Competition Commissioner Neelie Kroes said “Consumers foot the bill, as they risk paying twice for payment cards: once through annual fees to their banks and a second time through inflated retail prices paid not only by card users but also by customers paying cash.”
“The EU commission report underscores that Visa and MasterCard hit consumers coming and going. Cutting credit card interchange fees is an important victory for Europeans as well as for anyone traveling there,” said Tim Hammonds, President and CEO of the Food Marketing Institute, a Merchants Payments Coalition (MPC) executive committee member. “But American consumers and merchants pay more than twice as much as Europeans – two dollars out of every $100 directly to Visa and MasterCard issuers. These exorbitant hidden fees are out of proportion to the amount that would be paid in a competitive market,” added Hammonds.
The EU competition commission concluded that MasterCard abused its dominant position in the market by setting credit card interchange fee levels too high. In January, Commissioner Kroes referred to Visa Europe and MasterCard as “an effective duopoly” that make “outrageous profits”, and that consumers are being “ripped off” by card fees.
“Global recognition that Visa and MasterCard engage in illegal price fixing is a call to action for the Congress in 2008,” said Hammonds, referring to moves by Britain and Australia that have dramatically reduced credit card interchange fees in those countries as well in recent years. Credit card interchange fees paid by U.S. consumers and merchants to Visa, MasterCard and their member banks is expected to total more $40 billion dollars this year.
Credit card interchange fees in the United States, ultimately paid by American consumers, are currently more than twice as much on average as they are in Europe — the same credit card interchange fees just ruled too high by EU Commissioner Kroes. U.S. interchange fees on average are about 2 percent, while Visa Europe rates, for example, are capped at 0.7 percent.
Raising hidden credit card interchange fees is how Visa and MasterCard encourage banks to issue more credit and debit cards – as long as rising rates are kept secret, consumers have no way of knowing the extra costs they are paying. “That’s why U.S. interchange rates are among the highest in the developed world,” said Hammonds.
In fact, Visa and MasterCard still treat American merchants and consumers the same way they used to treat the Europeans. Here, credit card interchange fees are set in secret and credit card company rules make it practically impossible for merchants to tell customers how much they are really paying.
Interchange rates in the United States are now approximately two percent; in other words, two dollars out of every $100 spent on credit and debit cards goes to the credit card companies and consumers who pay whether they use plastic, checks, or cash. In the United States, interchange fees are the biggest credit card fee you have never heard of, dwarfing all the other credit card fees: late fees, over-the-limit fees, balance transfer fees, annual fees, inactivity fees, penalty interest fees, universal default, and even ATM bank fees.
The MPC is a group of retailers, supermarkets, drug stores, convenience stores, fuel stations, on-line merchants and other businesses who are fighting against unfair credit card fees and fighting for a more competitive and transparent card system that works better for consumers and merchants alike. The coalition’s member associations collectively represent about 2.7 million stores with approximately 50 million employees. For further information, please visit: UnfairCreditCardFees.com
According to their Dec 4 press release, the Merchants Payments Coalition is encouraged by a congressional hearing calling into question unfair credit card practices. Today’s hearing, held by the Senate Permanent Subcommittee on Investigations, is among several held this year that are scrutinizing the unfair practices imposed on consumers and merchants by credit card companies.
“This hearing is another example of how serious the issue of credit card abusive practices is for everyone,” said MPC Chairman Mallory Duncan, senior vice president and general counsel at the National Retail Federation. “The credit card industry has profited from outrageous fees, and congressional attention is beginning to shed some light on a broken system.”
One of the most outrageous fees most people have never heard of is the “interchange” fee, a percentage of each transaction that Visa and MasterCard along with their member banks collect from retailers every time a credit or debit card is used to pay for a purchase. The fee varies with type of merchant, transaction and card, but averages close to 2 percent per transaction.
Unlike other credit card fees, credit card companies don’t show interchange on monthly statements while their rules make it virtually impossible to show it on receipts and make cash discounts very difficult to offer. Instead, stores are effectively required to include the fee in the price of merchandise, meaning higher prices for all customers, even those who pay by cash or check. The hidden fee cost consumers and merchants $36 billion last year and is expected to top $40 billion this year.
Earlier this year, the Senate Banking Committee held a hearing on the billing, marketing and disclosure practices of the credit card industry. In addition, Duncan testified on behalf of the MPC during a July hearing on credit card interchange held by the House Judiciary Committee’s Antitrust Task Force. Duncan argued that Visa and MasterCard practices in setting interchange rates have constituted a violation of federal antitrust laws. MPC advocates a payment system that is transparent and open to competition.
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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