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Fight Unfair Credit Card Fees

The credit card interchange fee is the biggest credit card fee you’ve never heard of.  Nearly $2 of every $100 American consumers spend using credit cards go directly to the credit card industry through the interchange fee.

In 2007 alone, America consumers paid over $42 billion in credit card interchange fees.  Even consumers who don’t use plastic pay more through higher prices.

And the credit card interchange fee is set in secret – consumers don’t know they’re paying it through higher retail prices.  Interchange fees have risen a staggering 133% since 2001.

A rare bi-partisan consensus has emerged:  HR 5546/S 3086, The Credit Card Fair Fee Act which stops the price-fixing by the credit card industry and uses a transparent market-based process.

New On UnfairCreditCardFees.com

• Merchants and Consumers Welcome Judiciary Committee Passage of Bipartisan Legislation to Crack Down on the Hidden and Excessive Credit Card Fees
  Credit Card Fair Fee Act Would Mean Free Market Transparency, End Card Price Fixing
• Three in Four Americans Support Credit Card Fair Fee Act
  National Poll Finds Voters Want To Rein In Hidden Credit Card Fees That Inflate Prices; Legislation Would End Credit Card Secret Price Fixing (Poll Results)
• Merchants Say that Visa Fee Cut is Less Than Meets the Eye
  Credit Card Fees on Gasoline Might Actually Be Higher, Not Lower, Under New Visa Program
• Credit Card Fair Fee Act Picks Up Bi-Partisan Support
  Legislation will address credit card industry practices that hurt small business and their customers
• Merchants Welcome Senate Legislation to Fix the Problem of Hidden Credit Card Interchange Fees
  Senator Richard Durbin (D-IL) introduced the “Credit Card Fair Fee Act of 2008,” legislation that addresses the biggest credit card fee of all – the interchange fee, which cost Americans $42 billion last year.

Interchange is the biggest credit card fee you have never heard of

Credit card interchange fees are hidden in the cost of virtually everything you buy. Nearly $2 of every $100 the consumer spends using credit cards goes directly to the credit card companies. These fees inflate the cost of nearly everything consumers buy even when they pay by cash. Americans paid more than $42 billion in interchange fees in 2007, about twice what was paid in credit card late fees.

…and the fee you pay that pays for all that credit card junk mail!

The credit card interchange fee started out in the 1960s as a way to cover the real cost of a card transaction to the banks. Everything was done on paper then and credit card processing took far more time and manpower than today. Nowadays everything is done by computer yet credit card interchange fees have more than doubled since 2001 alone. Only 13% of the credit card interchange fee now goes to pay the real cost of the transaction, the rest goes to things like credit card junk mail.

US consumers pay twice or more what consumers in other countries pay

American consumers pay among the highest credit card interchange fees in the industrialized world, three times what British consumers pay. In Britain and some other industrialized countries, credit card interchange fees are viewed as unjustified and harmful to competition. Some countries, including the EU, are taking steps to deal with credit card interchange fees even though the fees consumers pay overseas are much lower than what Americans pay. The United States lags far behind the British, the European Community, and our other major trading partners in terms of grappling with this threat to open markets and free competition.

These secret credit card fees hurt consumers and merchants

US interchange rates are among the highest worldwide precisely because the fees are set in secret and hidden from view. Raising interchange fees is how Visa and MasterCard encourage banks to issue more credit and debit cards – as long as rising rates are kept top secret, consumers have no way of knowing the extra costs they are paying. Visa, MasterCard, and the big bank credit card issuers win; only merchants and consumers who are kept in the dark lose.

Visa and MasterCard operate like price-fixing cartels and violate federal antitrust laws. Visa issuers collectively set credit card interchange fees in secret and MasterCard issuers separately do the same. The fees can’t be negotiated and are not adequately disclosed to merchants or consumers. That’s why unfair credit card interchange fees continue to rise rapidly despite improved processing technology, consistently low interest rates, and rapidly rising card volume.

[Source: unfaircreditcardfees.com]

Chase Paymentech Chargeback Fees Are Unfair

Happy to note that JPMorgan Chase is a named defendant in our multi-billion dollar merchant antitrust interchange fee litigation. [They own the credit card processing service we use (Chase Paymentech)].

Our company, founded in 1990 services customers across the country and internationally.  One thing we have nearly never experienced were chargebacks – when a cardholder disputes an electronic payment transaction.

In all the year’s we have had, maybe, a handful of chargeback requests and most are resolved in the same way.  For instance, on January 14th, we had a Visa chargeback for $103.50 due to what the customer claimed was a “duplicate processing fee.”  In actuality, the customer ordered photo scans and then a separate, nearly identical charge for online photo printing from their digital files.

On January 29th the issue was resolved in our favor and the reversal applied to our account, less a $10.00 fee.  Chase Paymentech explained that we are still responsible for paying this processing fee from the chargeback.

This is another example of the bank-controlled credit card associations nickle-and-diming its customers.  Shouldn’t these excessive fees be covered by the already “Way Too High” merchant interchange fees that millions of merchants like us pay, which accounts for nearly $40 billion in fees each year?

And to think: if our customers ever called us and questioned an unfair fee how we would handle it.  Then again, we are not part of a giant cartel which stands accused of anti-competitive, illegal price-fixing.

More Interchange Revenue Centers

Merchants already are forced to pay from upwards of one-hundred separate interchange fees.  Few understand how these charges work, and even we didn’t know of one of the added chargeback programs.

Even though we are the lead plaintiff in the merchant interchange litigation and co-editors of WayTooHigh.com – The Credit Card Interchange Report, we didn’t know about the “chargeback fees.”

30 Minute Photos Etc and our ecommerce business, ScanMyPhotos.com might have had under a dozen chargeback requests over the past 17-years.  These are generated when a customer questions a specific electronic payment charge.

Just today, we received a multi-page chargeback notification from Visa USA domestic. The customer disputed a charge from early December and reported that it was a duplicate processing charge for the same order. The fact was this customer placed two separate orders for differing amounts over the span of a few days.

As a merchant, our account was immediately dinged for the full amount. A financial adjustment was made to our account as a result of the chargeback initiation.  While were were offered to dispute the charge, which we did, Chase Bank USA already took the money back.  Can you imagine that?  Ok, we are the lead plaintiff, suing JPMorgan Chase and the other member banks, along with Visa and MasterCard for what could be multiple billions of dollars, but did they have to be so petty?

What happens when other merchants overlook those chargeback notifications?  Funds could also be automatically withdrawn and if not challenged, lost.  Also, what happens to the interchange fee that we initially paid?  Would a disputed charge still have to incur an interchange fee?

Visa and MasterCard Gift Cards, Part II

Look at the back of a Visa Gift Card package to read their “important things to know.”

Visa’s solution for handling low balances on gift cards is to have you ask sales clerks to split the charge, which as a merchant we know is nearly impossible when the register is crowded with customers and adding any special transactions leads to nightmarish roadblocks.

In Visa’s own words: “If you try to purchase an item of greater value than your card balance, your card will be declined.  To purchase an item that costs more than the balance on your card, use a second payment method for the difference.”

If you thought the card associations’ and member banks reaped windfall profits from their merchant interchange fees, this is pure magic for them.  Declining cards leads to uncomfortable sales experiences and we think many consumers will just throw away the card with the small balances, and thus earning even more money for the banks. 

The film The Graduate had it right when telling Benjamin that the future was in “Plastic.”  How visionary they were.

[commentary: WayTooHigh.com]

Anatomy of How an Anticompetitive Monopoly Works

Late last week, I was asked to fly east to meet with the president of a leading multi-national conglomerate. Because of the short notice, rather than sitting up front, I chose to fly economy but forgot that many flights now charge for food. 

The lesson, however, was a good reminder of how anticompetitive monopolies work.  The onboard snacks were five-dollars and if you want to eat, that was the choice.  But, it was not the only choice, I could have brought food from home, purchased a meal at the airport or anywhere else in advance.  While food is the gateway to our stomachs, Visa and MasterCard and its 80% market power are a principle gateway to commerce – they nearly own the market.

Unlike the many choices for selecting a meal, there is one leading choice for electronic payments and nearly all ecommerce.  Businesses, like us, are forced to accept both payment cards. 

Food on planes are a good example, and so too is one new theme of the board game Monopoly.  There is now an electronic banking version. No kidding. Click here to view. 

 

According to the game, you “wheel and deal your way to a fortune even faster using debit cards instead of cash! All it takes is a card swipe for money to change hands. Now you can collect rent, buy properties and pay fines – with the touch of a button! It’s a new way to play the family classic that’s been brought up-to-date with modernized tokens (including a Segway personal transporter, an Altoids tin, space shuttle, flat-screen TV, baseball cap and a dog in handbag!), higher property values and locations based on your favorite landmarks.” 

Very modern, but the only thing nearly as antiquated in design as was the original board game is the payment twist.  When merchant interchange fees were created, it was cost-based and used to cover the fees associated with a four-party clearing house.  They were created back when there were hand-swipe manual card imprinters.  The new board game version is training people to use debit cards.  And, MasterCard and Visa are coincidently spending millions to train debit card holders to insist that retailers process the cards at the much higher, non-fixed fee credit card rates

[commentary: WayTooHigh.com]

Zero Merchant Credit Card Interchange Fees: Right On!

Credit card charges face RBA scrutiny
NEWS.com.au – Australia
The country’s two biggest retailers, Woolworths and Coles, presented their case for a zero interchange fee policy and regulation, while the banks and …

This is amazing. The banks and MasterCard suggest that zero interchange fees threaten innovations. Really. As a point of fact, we, as lead plaintiffs reinvented our business due to innovations.  In January, at the Intl Consumer Electronics Show in Las Vegas, we are again presenting and speaking on how technology and innovations have increased efficiency and lowered costs; that is for everything but merchant interchange fees.  The member banks, along with Visa and MasterCard’s argument is weak and antiquated.

Click here for more info on the recent News.AU.com article.

Interchange Fees are Obsolete as VHS Video Tapes

During the holiday season, look around.  Can you find any VHS cassettes to record television programs on?  How about super-8mm movie film?  8-track tapes?  3 /12″ floppy discs?  Catching on?

Merchant interchange fees are one of the few holdouts from the pre technology explosion, from before TiVo, MySpace, Youtube and the iPhone.  The electronic payment network is today what computer storage devises were years ago.   With consumers increasingly relying on their computers to safe keep their valuable digital libraries, Western Digital’s My Book storage system provides users a safe place to secure up to one terabyte (1 TB) of digital content.  In the mid-1990’s that hardware would cost about a million dollars and fill an entire room, today it is under $500 and is the size of a few cell phones.   With “Moore’s Law”, technology is getting faster and prices cheaper.  Except, when you have unbridled market power and control a system that is obsolete.  It is like a drug addict who only knows how to stay in a daze. 

But, we are awaking Visa and MasterCard and reminding them that their once impenetrable interchange fee fiefdom is on the verge of distinction.  Other countries have got smart and demand rates be lowered, in some cases to a tiny fraction of those fees in the U.S., even though our nation is among the most technology advanced, our communications infrastructure should mean it costs less to transmit data, and third-world fraud rates have to be higher, yet they too pay a tiny fraction of our near record merchant interchange fee prices.  Technology today is so super-fast, just like our high speed ScanMyPhotos.com picture scanning – we cannot help but lower prices. 

Even though the banks are reporting huge problems from its mortgage mess, they would not be allowed to wield their anti-competitive power to artificially hold up what are now obsolete fees to help cover their other mistakes.  We understand that only about 13% of all interchange fees are used to actually cover the transactional costs. 

[Commentary: WayTooHigh.com]