Visa, MasterCard Interchange Definitions

November 27, 2009

Want to know everything about Interchange?

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.

    [/source]

     
     
     

     


  • Recent Tweets From WayTooHigh

    August 16, 2009

    Follow WayTooHigh.com on Twitter

  • Cc_normal
    WayTooHigh: Visa and MasterCard operate like price-fixing cartels and violate federal antitrust laws.
     
  • Cc_normal
    WayTooHigh: Q: Why should retailers be taking on a ride when affinity reward credit cards R used? A: Consumers ultimately pay = NO FREE REWARDS
     
  • Cc_normal
    WayTooHigh: Visa, MasterCard make bulk of their money from charging fees to financial institutions that issue the cards http://ow.ly/io8j
     
  • Cc_normal
    WayTooHigh: Bank of America Says Three Directors Quit as Exodus Totals 10 http://ow.ly/iM7h
     
  • Cc_normal
    WayTooHigh: All About the Visa and MasterCard Promotional Gift Card Scheme (repost) http://ow.ly/kdY6
     
  • Cc_normal
    WayTooHigh: Q: How can banks (MasterCard / Visa) site “competitive pressures” regarding need for soaring credit card rates? They own the Monopoly board!
     
  • Cc_normal
    WayTooHigh: You know it’s a good day for consumers and retailers when Visa publicly expresses extreme disappointment: http://ow.ly/kdXF
     
  • Cc_normal
    WayTooHigh: Q: Why hasn’t MasterCard, Visa, Chase, CitiGroup, BofA, etc… not been shut down for collusion and credit card price-gouging. A: Dunno
     
  • Cc_normal
    WayTooHigh: More Scheming by Visa and MasterCard. Anatomy of How an Electronic Gift Card “Works:” http://ow.ly/kdWc (new post)
     
  • Cc_normal
    WayTooHigh: MAJOR SCAM: Visa, MasterCard gift cards issued rather than checks. They keep micro-payments remaining, because you can’t exceed your balance
     
  • Cc_normal
    WayTooHigh: @nancytrejos– As credit card companies lower reward benefits merchants interchange fees should be too, WE (consumers) pay those rewards
  •  

  • Cc_normal
    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
     
    • Cc_normal
      WayTooHigh: Rob Reeg. pres Global Technology & Operations for MasterCard Worldwide, frightens consumers http://ow.ly/izsH with misinformation
    • Cc_normal
      WayTooHigh: credit card companies cut ad spending 50% (Brandweek) = less risk and lower mkting costs, yet record interchange fees? http://ow.ly/k8UC
    • Cc_normal
      WayTooHigh: Why should retailers be taken on a ride when affinity reward credit cards are used? Consumers ultimately pay = NO FREE REWARDS
    • Cc_normal
      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?
    • Cc_normal
      WayTooHigh: As recession-weary consumers are swearing off their credit cards, credit card brands are swearing off advertising http://ow.ly/k8Ua

       

    • Cc_normal
      WayTooHigh: Network Rivalry Sparks 10-Year Quadrupling of PIN-Debit Pricing (via Digital Transactions) http://ow.ly/k8mc
    • Cc_normal
      WayTooHigh: only justification [for soaring interchange fees} is when you have an anti-competitive business model and you can illegally fix prices
       
    • Cc_normal
      WayTooHigh: Improved processing technology and the weak economy should be driving card-acceptance prices down http://ow.ly/k8lP (Digital Transactions)
       
    • Cc_normal
      WayTooHigh: RT @Denrael: @WayTooHigh there is competition but challenge is getting wallet space [Not really, MasterCard and Visa wield 80% Market Power]

       

    • Cc_normal
      WayTooHigh: Bank of America drops arbitration requirement (via AP) – http://ow.ly/k7KK (new post)
    • Cc_normal
      WayTooHigh: When I sued Visa, MasterCard + its member backs for illegal price-fixing of credit card fees back in ’05, never imagined power of Twitter
    • Cc_normal
      WayTooHigh: Bank of America Says Three Directors Quit as Exodus Totals 10 http://ow.ly/iM7e
    • Cc_normal
      WayTooHigh: Stop Unfair Credit Card Fees Tell Your Elected Representatives To Act On Interchange Fees http://ow.ly/iEOe
    • Cc_normal
      WayTooHigh: FIGHT CREDIT CARD FEES: Write Congress – Share this link with fellow merchants http://ow.ly/iENK
    • Cc_normal
      WayTooHigh: Circle K Circulates Petition Chain placing petition protesting credit-card fees in its convenience stores http://ow.ly/iEN1
    • Cc_normal
      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
    • Cc_normal
      WayTooHigh: New to ScanMyPhotos.com: For updates on our antitrust lawsuit against Visa, MasterCard, major banks See: http://ow.ly/k4Wj
    • Cc_normal
      WayTooHigh: Had media interview w/ biz pub. Explained credit card companies get away with high rates because they = monopoly, fix-prices, NO competition
    • Cc_normal
      WayTooHigh: RT @7ElevenCedarPk: NYTimes article on 7-Eleven and the petition for unfair credit card fees. http://bit.ly/5fgCx
    • Cc_normal
      WayTooHigh: The fees – known as credit-card interchange fees, or swipe fees – are unfair to us and deceptive to the donors. http://ow.ly/jwd8
    • Cc_normal
      WayTooHigh: Congress must support “Credit Card Fair Fee Act,” especially in a recession. Takes ~$60 bln out of banks unfair rev into consumers pockets
    • Cc_normal
      WayTooHigh: Maria Aspan (American Banker) says Citigroup will charge annual free for some credit cards. even as Interchange fees at record high
    • Cc_normal
      WayTooHigh: credit card company merchant interchange swipe fees ARE wiping independent businesses off the map in neighborhoods across the U.S.

       

    • Cc_normal
      WayTooHigh: TARP Recipients Fighting To Keep Charging Exorbitant Credit Card Fees (via Huffington Post) http://ow.ly/gVvH
    • Cc_normal
      WayTooHigh: Obama administration planning broad reworking of fees financial firms pay for their federal regulation, (WashPost) http://ow.ly/k0aJ
    • Cc_normal
      WayTooHigh: Visa and MasterCard issuers collectively set credit card interchange fees in secret. These fees can’t be negotiated
    • Cc_normal
      WayTooHigh: A central bank study in March recommended changes to Brazil’s credit-card market to make it more efficient http://ow.ly/jjm1
    • Cc_normal
      WayTooHigh: U.S. retailers and consumers refuse to be treated worse than New Zealand, Canada, Australia and other countries. http://ow.ly/jVvR
    • Cc_normal
      WayTooHigh: 4-party credit card payment systems is broken; interchange fees no longer cost-based, floods banks with $ at expense of consumers
    • Cc_normal
      WayTooHigh: Competition – what Visa, MasterCard, banks know little about, is why 0 interchange fees will benefit consumers = lower costs
    • Cc_normal
      WayTooHigh: Did you know that when you make a non-profit charitable donation, Visa, MasterCard and credit card issuers MAKE $$$ off the top.
    • Cc_normal
      WayTooHigh: Tulips, Silver, Housing Market and Oil Speculators Have Nothing on MasterCard and Visa {July, 08, WTH) http://ow.ly/g1aY #18000
    • Cc_normal
      WayTooHigh: Commerce Commission And Visa Reach Agreement To Settle Credit Card Interchange Fee Proceedings http://ow.ly/jLmK
    • Cc_normal
      WayTooHigh: Why Won’t Visa Give U.S. Competition & Transparency Promised to New Zealand on Credit Card Fees? (via @NCASOnline) http://ow.ly/jVvd
    • Cc_normal
      WayTooHigh: Retailers are asking the public to help them eliminate a credit card interchange fee that often gets passed on to users http://ow.ly/jVuD
    • Cc_normal
      WayTooHigh: How Credit Card Companies Are Changing the Fine Print (via Mary Palon, WSJ) http://ow.ly/jVsw
    • Cc_normal
      WayTooHigh: Banks are like health care industry, LOADS of misinformation on credit card interchange fees. Credibility at zero.
    • Cc_normal
      WayTooHigh: Many non-profit charities HURT by MasterCard and Visa credit card fees. Forced to pay upwards of 5% interchange fee for few manual charges

       

    • Cc_normal
      WayTooHigh: Credit Score Shell Game: As High Scores Vanish, Borrowers’ Luck Runs Out (via Nancy Trejos Washington Post) http://ow.ly/ftrP #18000
    • Cc_normal
      WayTooHigh: Businesses incurs a fee anytime a customer swipes a card. http://ow.ly/j0eY

      Cc_normal

    • WayTooHigh: Credit Card Issuers’ trick: Ads showing “fun” ways to design photos on credit card = distraction, should be URGING you to READ terms #18000
    • Cc_normal
      WayTooHigh: Three bills have been introduced in the 111th Congress that address the issue of interchange fees http://ow.ly/jNRA

       

    • Cc_normal
      WayTooHigh: It’s Visa and MasterCard that should thank consumers every time they use a debit / credit card at stores: http://ow.ly/iftW
    • Cc_normal
      WayTooHigh: From MasterCard Inc. Q2 Earnings Call, NO explanation about price-fixing and intl interchange fees that are 1/3 that in U.S.
    • Cc_normal
      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
    • Cc_normal
      WayTooHigh: Commerce Commission And Visa Reach Agreement To Settle Credit Card Interchange Fee Proceedings http://ow.ly/jLmA
    • Cc_normal
      WayTooHigh: Our economy lost trillions POST Bush’s $300 p/ person stimulus program. But, Republicans silent on anything but attacking current plan.
    • Cc_normal
      WayTooHigh: SHAME on Visa, MasterCard, credit card companies for misguided effort to shift message from BANK GREED to chain store profiteering.
    • Cc_normal
      WayTooHigh: Congress must support “Credit Card Fair Fee Act,” especially in a recession. Takes ~$60 bln out of banks unfair rev into consumers pockets
    • Cc_normal
      WayTooHigh: Visa, MasterCard look abroad for growth (via Reuters) [Even thought U.S. interchange fees ~3x more than abroad?] http://ow.ly/jIw9
       
    • Cc_normal
      WayTooHigh: Stop Unfair Credit Card Fees Tell Your Elected Representatives To Act On Interchange Fees http://ow.ly/iEOa
       
    • Cc_normal
      WayTooHigh: When anticompetitive and illegal interchange fee price fixing ends, family-owned restaurants, dry cleaners, etc. will be SAVED

    “Culture Shock for IPOs: Pay Disclosures ” (via WSJ)

    December 8, 2008

    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.


    Even the Oil Cartel Lowers Prices

    October 10, 2008

    Crude-oil futures plunge nearly $7 to trade below $80 a barrel

    During this global financial crisis, even gas prices are plunging. In an earlier WayTooHigh.com posting, 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?

    Tulips, Silver, Housing Market and Oil Speculators Have Nothing on MasterCard and Visa

    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.


    Banking Bailout Devastates Consumers – Boondoggle for Banks

    October 4, 2008

    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.


    Did Visa and MasterCard’s Greed Force Starbucks to Fire 600 Employees?

    August 7, 2008

    Repost

    [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.
      

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


    “Credit card costs are driving up the price of gas” (via OC Register)

    July 2, 2008

    Reprinted from The Orange County Register “Gas Pains” blog, July 2, 2008 [posted by John Gittelsohn].

    It’s hard to argue that soaring crude oil costs are driving up the price of a gallon of gas.

    But Mitch Goldstone, an Irvinegoldstone-protest-2.jpg 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.