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WayTooHigh.com - New Look

Since we launched our merchant interchange antitrust class action against Visa, MasterCard and its leading member banks in 2005, this site has provided more than 800 daily news and commentary updates. Today we are modernizing the site to better enable it to be viewed by more people. The new site boasts several features to garner more attention.

Mitch Goldstone & Carl Berman [lead plaintiffs]
co-editors - WayTooHigh.com - The Credit Card Interchange Report

"Its Overhaul Complete, Visa Shoots for the Moon with Its Pending IPO" (Digital Transactions)

Highlights from Digital Transaction Nov 10th article - click here.

1. "Under the planned IPO, which could happen as soon as 120 days after the global reorganization Visa completed Oct. 3, Visa would sell an approximately 51% interest in the company to the public through so-called Class A shares. The rest of the shares—Class B held by Visa USA members and Class C held by other financial-institution members internationally—have no voting rights.
2. The filing says Visa will use the IPO’s net proceeds for ..., and for a deposit into an escrow fund to cover settlements or judgments from litigation.
3. ... Visa still faces a host of suits and regulatory challenges involving everything from interchange to antitrust to currency- conversion fees.
4. Despite MasterCard’s encouraging experience, Visa’s success on Wall Street is by no means guaranteed. Shares of Discover Financial Services LLC have fallen 37% since Morgan Stanley spun off its card subsidiary in late June.

Understanding the Word "Insolvency" Is Crystal Clear (WayTooHigh.com)

If our merchant antitrust litigation is successful, and the facts are on our side, Visa® and Mastercard® could face insolvency. These aren't our words, but those warning statements published in both card associations' offering documents.

However, the news of what could be the second largest IPO in U.S. history is garnering little attention. Other than a few wire service updates, so far the news has been deafeningly silent. The big news is that with the American Express® settlement solved, according to the news stories, it's clear sailing for Visa's IPO.

Not!

We think, just like with MasterCard, the thousands of banks which own Visa will try to cash out as fast as possible. So fast, that it might even topple and overturn the offering.

Last time, the member banks were not in the fiscal calamity that they face today. When MasterCard went public, the member banks were not realizing billions in mismanaged losses. Today, they are in much greater need of enhancing their capitalization; what better way than to pass off their ownership in Visa? Their earlier rush to sell off part of their MasterCard investment , and its overshadowing price-fixing litigation, turned into one more multi billion dollar fiasco - the price they set was $39.00 a share. Oops - with MasterCard nearing $200.00, it seems that nothing they do is right. Are they so distracted by our lawsuit that they have lost their focus and spirit?

Whether it was buying up the subprime housing mortgages and loosing billions, to their other poor decisions that even forced CEOs to flee, they just cannot get it right. This time, they might get extra greedy at the exit and seek an offering price that will melt even the appetites of the most drunk-on-risk thrill-seeking investors'.

Reporters are not writing about the warnings of insolvency, nor are they explaining that our litigation is a much larger threat than even their pay off to AmEx.

[Commentary: WayTooHigh.com]

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

Visa Inc's® hope to raise $10 billion, in what would be the second largest U.S. IPO, and could then transfer partial ownership to outside shareholders. This seems to mirror MasterCard's® strategy to limit the member bank's antitrust liabilities. But, not so fast. Our litigation doesn't start on the day of the IPO, but, instead goes back years. Similar to how if someone breaks the law then, after the fact turns good, they still violated the law.

The credit card network in its filing said that from the proceeds they hope to raise, they plan to deposit a portion of it into an escrow account to pay settlements or judgments related to litigation.

Visa Hopes to Raise $10B in IPO

[Source: via AP, Commentary: WayTooHigh.com]

WayTooHigh.com Prepares To Change Format

Editors note: If you are eager to help the cause and have experience with Blogger and WordPress, please let us know. We are preparing to transfer this site to a more modern, high tech service because our first postings took place way back when Blooger was just beginning - so much has changed.Email us with your portfolio of other blog experience and a link to your existing WordPress site.Thanks for your interest.

NEW YORK (AP) _ Analysts said Thursday that MasterCard Inc. is next in line to settle with American Express Co., which is seeking legal damages for being blocked out of the U.S. bank-issued credit card business.

"$5.00 Gas Now In California - Think of the Windfall Profiteering From Credit Card Interchange Fees at the Pumps (via KSBW-TV)

AP:Analysts Say MasterCard Inc. is Next to Settle with American Express Co (via AP)

Click here to read the AP story. Which included a mention by "Bear Stearns analyst David Hochstim [who] said Mastercard® may not feel pressured to resolve the litigation quickly. Visa, he said, was concerned about resolving the issue before its upcoming initial public offering."

This news is most significant, as the AmEx® suit is tiny in relation to the much larger and more widespread merchant antitrust litigation, which has the potential not just to distract from the VISA IPO, but cause the company to face insolvency.

[Commentary, WayTooHigh.com, via AP news story]

Associated Press Goofs on Visa® / Amex® Settlement Story (WayTooHigh.com)

Wow, did the Associated Press goof. They must have had all the lead financial reporters covering the market plunge on Wednesday and had a second-string reporter copy press releases rather than research what is a huge admission by Visa®. You would think that $2,250,000,000 was enough money to get the story right?

According to AP, "The truce announced Wednesday rids Visa of a potential albatross before the San Francisco-based company's initial public offering of stock." The reality is the AmEx® settlement is puny when compared to the more than $100,000,000,000 mega-billion dollar violations that Visa, MasterCard® and their member banks could owe in our class-action merchant interchange litigation. With more than eight-hundred WayTooHigh.com news and commentary postings - spanning more than 2 1/2 years - and with a great deal of attention drawn towards our litigation, Visa and its sister payment network, MasterCard, are not in the clear, by any means.

Extracted from the preceding SEC IPO filing, in MasterCard Inc's own words:

1) "... We have not established reserves for any of the significant legal proceedings in which we are currently involved."

2) "If we are found liable in any of these lawsuits, we may, among other things, be forced to pay damages and/or change our business practices and pricing structure, which could have a material adverse effect on our revenue and profitability, or, in certain circumstances, even cause us to become insolvent, and result in a significant reduction in the value, or the complete loss, of your investment ..."

3) "If we are less successful than Visa in defending interchange fees, we could also be competitively disadvantaged against Visa."

4) "If we are ultimately unsuccessful in our defense of interchange fees, such regulation may have a material adverse impact on our revenue, our prospects for future growth, and our overall business."

Largest Planned IPO Since Google has No Safety Net (WayTooHigh.com)

If you read into the AP story, it appears that Visa's IPO will now face calm waters. Hardly. Just look at their SEC filing and very clear risk factors that if [when] we are successful and prove our case that they illegally used their market power to conspire to fix prices, along with the triple damages, they could face "insolvency." The same is true for MasterCard as well. Can't get any clearer than that!

"Besides raising financial uncertainties, the case threatened to raise embarrassing questions about Visa's past business practices with a September trial date looming," said AP. Embarrassing?, just read the prior eight-hundred and one WayTooHigh.com postings! Overlooking our weak grasp of English and liberal rules of grammar, and you see something much more ominous.

Although Visa today did not acknowledge any wrongdoing, a first-grader would know that something must have happened as they prepare to hand out $2,250,000,000. Could you imagine if they DID do something wrong?!

According to the AP story, "American Express' three-year-old lawsuit painted an unflattering portrait of Visa, alleging the network operator conspired with some of its largest card issuers to thwart American Express' growth." So far, MasterCard's head remains in the sand. Everyone at the card association seems blind to the reality of our case, especially Sharon Gamsin, their PR and communications hack, who according to the same wire story said "MasterCard remains confident about its defense against the allegations." Sure. Since the same financial institutions which own and control Visa and gave the green light to settle, were also on the MasterCard and Visa boards for many years, what's the difference?

Getting back to that first-grader, even they would have to conclusively understand that MasterCard is next to recognize that the game is up.

"Before IPO, Visa Reaches a $2.25 Billion AmEx Antitrust Settlement" (Digital Transactions)

[commentary: WayTooHigh.com, via AP news story]

"AMERICAN EXPRESS REACHES $2.25 BILLION SETTLEMENT AGREEMENT WITH VISA" (via, company press release)

Interesting that MasterCard put $650,000,000 in reserves from its IPO to cover litigation expenses, yet, it was Visa who agree to settle first. From the below American Express press release, they explain that: "[a]s the sole remaining defendant, MasterCard would be liable for the full amount."

---------------------------
Reprinted AmEx Release in it's entirety.

AMERICAN EXPRESS REACHES $2.25 BILLION SETTLEMENT AGREEMENT WITH VISA
NEW YORK, November 7, 2007 --

American Express said today that it has reached an agreement to drop Visa as a defendant in a lawsuit alleging that MasterCard, Visa and their member banks had illegally blocked American Express from the bank-issued card business in the United States.

Under terms of the settlement agreement, Visa will pay a maximum amount of $2.25 billion to American Express. Individual banks named in the lawsuit will also be dropped as defendants. These include: J.P. Morgan Chase, Capital One, U.S. Bancorp, Wells Fargo and Providian. The agreement is subject to the approval of Visa’s member banks.

MasterCard remains the sole defendant in the American Express case. The lawsuit, which was filed in Federal court (November 2004) by American Express, seeks monetary damages for the lost business opportunity that resulted from the illegal conspiracy to boycott American Express. American Express is expected to seek damages in the billions of dollars. As the sole remaining defendant, MasterCard would be liable for the full amount.

“The size of this settlement, along with earlier court rulings, underscores the seriousness of the damage done by the illegal boycott,” said Kenneth I. Chenault, chairman and chief executive. “We plan to move forward with the litigation to hold MasterCard accountable for the illegal actions that blocked banks from working with us for many years and to seek full compensation for the value that would have been generated for our shareholders.”

Under terms of the agreement reached with Visa, Inc., Visa USA, and Visa International, American Express will receive an aggregate maximum payment of $2.25 billion. An initial
payment of $1.13 billion will likely be recognized by American Express in income during the fourth quarter 2007. The remainder, payable in installments of up to $70 million per quarter over the next four years, is subject to achieving certain quarterly performance criteria within the U.S. network services business of American Express.

“Given the strong growth momentum we have built within that business, we are highly optimistic in our ability to meet those performance requirements,” said Mr. Chenault.
In light of the settlement, American Express said that it is likely to incur a number of significant additional fourth quarter expenses, including:

Incremental investments in marketing, promotion, rewards, cardmember services and other business building initiatives designed to capitalize on competitive opportunities in the payments industry at a time when some competitors are pulling back.

Additional funding for the American Express Foundation, which will support the company’s ongoing philanthropic activities.

Litigation expenses related to the lawsuit against Visa and MasterCard.

Given the continued evolution of its rewards programs, the Company also said that it is currently evaluating enhancements to its method of estimating its liability for Membership Rewards®, including the consideration of an actuarial based approach for estimating the ultimate redemption rate. These enhancements could result in a significant one time addition to reserves upon implementation.

“Rewards and customer loyalty programs have been a key element of our success, and we expect them to continue to be a centerpiece of our strategy going forward,” said Mr. Chenault. “The overall economics of a rewards-based strategy are very favorable: higher spending, stronger loyalty and superior credit metrics. Our expectation is that more Cardmembers will enroll in rewards programs and generate a growing share of their overall spending with American Express. Our higher enrollments and improvements to the program in recent years are causing us to continually evaluate and enhance the method to estimate the ultimate usage of points earned by our Cardmembers.”

The aggregate cost associated with this potential addition to the Company’s Membership Rewards liability and the other items mentioned above could represent a significant portion of the payment expected to be realized this quarter.

The Company said that any decisions about whether to reinvest future payments into business building activities will be made on a quarter by quarter basis over the next four years. “This settlement compensates us in part for past damages in a way that allows us to invest in our future,” said Mr. Chenault. “We intend to be consistent with our approach of the last several years, capitalizing on marketing and promotional opportunities and enhancing our network when we see chance to gain a competitive advantage. We have been generating very attractive returns on our investment spending of the past few years and believe that the pipeline of market opportunities will continue to be strong in the years ahead.

American Express Reaches $2.25 Billion Settlement Agreement With Visa
“At a time when weakness in parts the economy is affecting many financial services companies, the settlement will give us greater flexibility and confidence to meet our financial goals while continuing to fund business building initiatives and support future acquisitions.”

"Visa and Member Banks To Pay American Express $2.25 billion (via Reuters)

According to Reuters, CNBC is reporting that Visa® will pay rival American Express® $2.25 billion to settle a separate antitrust suit.

[Click here to view the American Express press release, via American Banker]

From our prospective, this is encouraging for our class-action and important news as the world's largest credit card company prepares for a multi-billion dollar IPO early in 2008. [Then again, pending current stock market conditions, who knows when the right market timing will be?]

The case was initiated a year before our complaint filing, in 2004 by American Express which charged the two leading card associations and some of its member banks of preventing thousands of banks from using the American Express cards through anti-competitive practices. As with our class-action, the two credit card associations were accused of being co-owned by the very same banks. The acquirers and issuers are the same - the leading difference between the giant 80% Visa and MasterCard® market power is the spelling of their names. Yes, the card associations explain they are in head-to-head competition, but what they don't explain is they are on the same team. Think of two pro football players on the same team; yes, they are different, but they have the same ownership, controls and game plan.

American Express claimed that Visa and MasterCard both violated antitrust law by barring banks from issuing credit cards for rival networks. Just as with our litigation, Visa faced triple damages.

We are very encouraged by this news and expect that MasterCard will quickly come to the same conclusion as Visa. As this litigation faces settlement, the associations and banks legal teams will have more time to read WayTooHigh.com and its message that interchange fees are too high, unjustified and in violation of antitrust laws.

[Commentary: WayTooHigh.com , via Reuters]

"Antitrust Claims Against Credit Card Companies and Major U.S Banks" [MSN Groups: USBanks Complaints]

"Credit Card Fun Page" (Nov. NACS Magazine)

Click here to view the Credit Card Fun Page featured in the November issue of NACS Magazine.

JPMorgan Chase Giving Away Coal, No Kidding (WayTooHigh.com)

We must have deflected too much attention from the lawyers representing the named defendant, JPMorgan Chase® in our antitrust price-fixing litigation for them to have missed this one. The bank, which owns the world's largest merchant payment acquirer (CHASE Paymentech®), issued a press release on Nov 1 that is offering some of its cardholder customers to qualify for a chance to win a lump of coal. With commodity prices soaring, we wonder how much a lump of coal is going for these days? What might have been intended as a joke, to us, seems more like an invitation for PIN purchases to brush off a space on their mantel for showing off that price.

More info, click here

[Commentary, WayTooHigh.com]

"JPMorgan Chase Calls It: 'A Lump of Coal' - We Call It: More Bait &-Switch Banking Gimmicks (WayTooHigh.com)

More tricks by the card associations and its member banks. As we near the holiday retail selling season, our business, along with millions of other retailers are again being faced with more gimmicks and schemes to force consumers to use their debit cards as credit cards. Even though the funds are instantly withdrawn from their bank accounts, the interchange fees are much, much higher, and that is how the "contest" games. Through contests and bait-and-switch-like small-print rules, cardholders can only enter the fun if they do not use the less expensive PIN-based debit card electronic payment.

We received the below letter today. But, first, as a refresher on how these games are played, see the below links to prior WayTooHigh.com postings. Even JPMorgan Chase® has a sense of humor as it sticks its tongue in the face of all its merchant customers. In the bank's own words from their Nov 1st press release: "(For this promotion, PIN purchases qualify only for a lump of coal)."

Look at What Visa® is Up to Now (WayTooHigh.com)

Confusing Debit Cards (WayTooHigh.com)

Who Is The Real Violator? (WayTooHigh.com)

WayTooHigh.com Reader Comment

Dear Mitch Goldstone:

JPMorgan Chase (one of the named defendants in your antitrust litigation, and the biggest bank in my area with a 17% market share) has came up with a sneaky new way to switch people over from cheaper PIN debit transactions to more expensive signature transactions this holiday season, forcing merchants to pay higher fees in the process (just when they need it the least).

The promotion, named "Chase Picks Up The Tab" (which runs until December 31) goes like this: Every 500th Chase Visa Check Card purchase from all enrolled Chase checking customers who reside within the promotional area is paid for by Chase (up to $500, and if the purchase is less than $5, the payoff is $5)... Chase will be giving out an estimated 50,000 purchases. But PIN-based purchases are not eligible among the "qualifying purchases".

Way to go, Chase! You just made merchants furious!

And how will this be paid for? Interchange profits, of course... instead of merchants paying 25-50 cents for PIN debit, they'll have to pay that 1.8+% signature debit fee, so this should be called "Merchants Pick Up The Tab (In Higher Interchange Fees)". And customers will want to sign because of this promotion... so what will be the bottom-line hit to merchants in areas with large amounts of Chase checking customers, and what will be the payoff to Chase (and Visa Inc.)? You can bet on one thing: It won't be pocket change for either.

P.S.: Don't forget that JPMorgan Chase also owns over half of one of the three largest Visa/MasterCard processors (Chase Paymentech), so the payoff to JPMorgan Chase could be even bigger at some merchants. Any wonder why JPMorgan Chase is doing better than Citigroup or Wells Fargo?

"Arch Critic Calls for Citigroup to be Broken Up" (Telegraph.co.uk)

"The analyst who triggered the departure of Citigroup chairman and chief executive Charles "Chuck" Prince has called on his successors to break up the banking conglomerate" - Read more.

"Markets Fear Banks Have $1 Trillion in Toxic Debt" (The Independent)

The Banks Misguided Fee Adventure (WayTooHigh.com)

Citigroup Inc.®* deflected its attention from prudent financial management and instead became greedy.

This Reuter's picture of CitiGroup's leaving Charles Prince is "price-less."

Anatomy of Greed

Look back at the bank sponsored bankruptcy reform law of 2005; it made clearing consumer debt much harder. Fewer people were able to file for Chapter 7 protection, which was aimed to add further stability and protections for the financial institutions. Or, was it just a another sweetheart deal from Washington to its hefty campaign contributors and lobbyists? It helped the credit card industry and handed them billions of dollars while debtors had to pay back these "loans." The "Bankruptcy Abuse Prevention and Consumer Protection Act" was little more than a payoff to the banks. Read more.

While the credit card associations and its member banks were cheering, they lost sight of a much bigger storm - sub prime loans that enabled people earning just $40,000 annually to "buy" $800,000 homes and others to with few assets to flip homes. They became little more than renters who were teased with low or no upfront down payments and no income verification requirements.

Once the intoxicating, phony interest-only mortgages turned into a devilish nightmare, the banks lost billions. It just cost Charles Prince, Citigroup's CEO his job. But, it already ruined millions of dreams and destroyed lives, except for the few with titanium "golden parachutes." Click here for Reuter's update.

Reuters is reporting that "Citigroup may write off $11 billion of sub prime mortgage losses, on top of a $6.5 billion write-down last quarter." Even MasterCard, had set aside $650,000,000 to help cover its legal liabilities.

Where is the leadership? Where is the ethics? Rather than covering these huge losses, the inexpensive solution was to not to be greedy in the first place.

The new must-read manual for the banking executives are a new edition topic of: The Idiots Guide To Common Sense, and especially The Idiots Guide To Understanding the Sherman Antitrust Act.

Barron's has a feature profile (Nov 4) on MasterCard® that explains more, including what it asserts is the card association's "low balling earnings indications."

Today, the thousands of banks, which control[ed] MasterCard and own Visa® were thought to have more greed than even the oil companies. The "Bankruptcy Abuse Protection" scheme was wrought with one-sided greed. Now, the mortgage collapse faces similar greed. Both cost billions to address and the newest round, the ongoing misguided fee adventure with anti-competitive merchant interchange rates can become the banks' newest way to squander billions more.

Interchange fees are no longer cost-based - only about 13% of interchange fee costs are used to cover its transaction costs. Along with Visa and MasterCard, the banks too are being accused by us and members of the class action of market power to illegally fix prices. With all their other leaking dikes, a new round of billion-dollar floods is unpreventable and they could again turn to wield their unbridled greed by raiding their interchange cash cow, raising rates and causing more hardship.

The banks rich piggy bank are interchange fees - a $40 billion annual hidden tax on the economy. They schemed in their misadventure to dump their legal liabilities by selling off part of MasterCard on the public. Now a much larger IPO is on the horizon to do the same with Visa. Washington and our economy should take notice. Like with MasterCard, Visa is warning that they too could face insolvency if our litigation is successful.

With the loss of leadership jobs at Merill Lynch and Citigroup and many newly homeless customers in defaults and billions in existing fiscal mismanagement, we urge our readers to prepare for the next economic bail out. This time, it is not about mismanagement, but monumental greed. The new looming concern are those corporate chieftains who are looking more Al Capone-like as a modern day "untouchable" symbol of the collapse of law and order. But, don't look for the banks to be robbing themselves to cover their misadventures; interchange fees are their hedge that we must all be very worried about.

*[Citi is is a named defendant in our merchant antitrust litigation]

Background Links

"Visa's IPO Use of Proceeds Plan and Interchange Overview (commentary, WayTooHigh.com)

Consolidated Amendment to Class Action Complaint (WayTooHigh.com)

Letter to Judge John Gleeson, Re Challenge to MasterCard's Stock Reclassification (WayTooHigh.com)

[commentary: WayTooHigh.com]

WayTooHigh.com Now Powered By FeedBurner

To ensure you receive real time, live updates from WayTooHigh.com, please review the various feeds on the right side. WayTooHigh.com is now powered by FeedBurner, the leading provider of media distribution and audience engagement services for blogs and RSS feeds. With this addition, WayTooHigh.com will now better commercialize, promote, deliver and share our daily news and commentary updates with even more readers who are following this multi billion dollar antitrust litigation against the two leading credit card associations and its member banks.

This site features the most comprehensive international breaking news, daily updates and commentaries on the history of merchant interchange fees. The goal in representing millions of merchants and cardholders is to reform an antiquated, costly and unfair payment system and explain why the nearly $40 billion annual merchant interchange fee is a hidden tax on consumers and retailers.

WayTooHigh.com: The Credit Card Interchange Report, is co-edited by Carl Berman and Mitch Goldstone, founders of California-based 30 Minute Photos Etc., the national online boutique photo service, 30minphotos.com and its newest division, ScanMyPhotos.com. Berman and Goldstone are also the lead plaintiffs and class representatives in the multi-billion dollar antitrust class-action litigation against Visa, MasterCard and member banks. 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.

Visa and MasterCard's Merchant Rules Are Irrelevant (WayTooHigh.com)

Last week, we posted a commentary on the fact that the American Red Cross was in violation of their payment processing agreements. They were "requiring" a minimum payment to accept donations from electronic payments. What did Visa® and MasterCard® do? Nothing, as far as we could see. This helps draw renewed attention, not to the invaluable contributions of the American Red Cross, but rather to the breakdown in oversights for the silly interchange fee rules.

Here's another posting on the topic.

Credit Card Fees Force Red Cross to Impose Minimum Donation Amounts

[commentary - WayTooHigh.com]

Breaking News on Citigroup [one of the named defendants member banks]

Several news sources are reporting on the imminent ouster of Citigroup Inc.® chief executive Charles Prince.

The WSJ's Robin Sidel is reporting [click here, subscription required] that "Charles Prince, the beleaguered chief executive of Citigroup Inc., is planning to resign at a board meeting on Sunday, according to people familiar with the situation.... Citigroup has lost more than a fifth of its market value since Oct. 12."

"Why Credit Card Interchange ... Probably Isn't Going to Go Down" (The Merchant Account Blog)

This Holiday, Most Gifts Will Be Gift Cards, According to PayPal (via BW release)

According to the Oct 31, BusinessWire release, "the Nielsen survey [for PayPal] revealed that more shoppers are playing it safe this holiday season by buying gift cards, rather than purchasing tailored gifts for their loved ones. In fact, 64 percent of shoppers said they plan to give gift cards. But recipients don’t seem to mind. Fifty seven percent of respondents said they would actually prefer to receive money or a gift card in place of the traditional present."

In 2006, just under 30% of all holiday shopping was online, this year, according to the PayPal release, it will be 40% which means that the card associations and member banks are poised to take even more money from interchange fees. Nearly all online orders require electronic payments. For our business, 100% of all ecommerce business requires electronic payments.

Why is this so important to our interchange battle?

When you use a credit card, where the acquiring and issuing financial institution are the same, effectively, they mirror gift cards. The gift card is being electronically transacted by the issuing business and ... there are no interchange fees. Just like when you write a paper check, or use a PIN-based debit card in Canada, there are no interchange fees. So, the question is, how can Visa® and MasterCard's® market power still force this $40 billion hidden tax on retailers and consumers?

The banks might counter and explain that gift cards prove there is a choice and that there really is competition. But, not so fast. How are most gift cards paid for? That's right, plastic! And, Visa and MasterCard have nearly an 80% market share of the electronic payment network.

[Commentary, WayTooHigh.com, via survey data from the Oct 31 PayPal BW release]

OIL NEARS $100.00 A BARREL - GENERATES HUGE NEW INTERCHANGE FEE PROFITEERING

Understanding Interchange Fees Requires a Master's Degree in Finance at Disney (WayTooHigh.com)

Back when interchange fees were first created, it was cost-based to cover the electronic payment transactions. Today, this job posting shares one more example why interchange fees are out of control. The Walt Disney Company is seeking an executive with a master's degree to analyze interchange costs.

Job description [GadBall Jobs]:

• This role on the WDP&R Credit Card Management team will be responsible for planning and forecasting credit card commission expense for the Walt Disney World Resort and the Disney Cruise Line and producing variance analysis for actuals versus plan, prior year and forecast. This role will analyze interchange expense to identify and evaluate the source of transaction downgrades and propose remedial action to mitigate the effects of transaction downgrades. This role will also be responsible for identifying industry trends and developing analyses to evaluate the effects of the trends on Segment operations. Additionally this role will be responsible for project management of planned initiatives and for creating executive presentations related to issues, projects, and opportunities.

[Source, commentary, WayTooHigh.com, via GadBall Jobs posting, see link]

Crude Oil Nearly Doubled Since February (WayTooHigh.com)

Back in February, when we thought $50.00 a barrel crude oil was too much, the banks were reaping huge windfalls from their merchant interchange fees. But now. Now, with gas nearly 100% higher - in just eight months, think of the shared gouging that is being practiced by the financial institutions. What other business can demand a nearly 100% price increase and in a matter of a few months? We are talking billions of dollars, but the banks and their market power are remaining silent on how they can justify these fees.

"$105 a Barrel" Would Mean More Windfall Profits for Credit Card Companies (WayTooHigh.com) (Originally posted on May 26, 2006)

[Commentary: WayTooHigh.com]

Repost: Printing The Exact Interchange Fee on Every Electronic Charge Receipt (WayTooHigh.com)

Printing Exact Merchant Interchange Fee on Charge Receipts by Thanksgiving (WayTooHigh.com)

Seventy-two pages, five-pages or one line? (WayTooHigh.com)

Why not post exact interchange fee on receipts? (WayTooHigh.com)

Every credit and debit card receipt should include interchange charge (WayTooHigh.com)

MasterCard® interchange rate schedules on website (via PRNewswire)

On a Personal Note, Today, ScanMyPhotos.com [30 Minute Photos Etc.] was Profiled in USA Today (Click here to read)

What's Higher: Gas Prices or MasterCard's® Market Capitalization? (WayTooHigh.com)

With gas prices nearing $100.00 a barrel and MasterCard's® stock price soaring towards $200.00 a share, we cannot help but draw a comparison. More motorists are paying with plastic because they simply do not have enough money in their wallets. The windfall earnings to the banks with still own a hefty percent of the world's second largest payment network continues to rise.

In May, 2006, Forbes' Liz Moyer wrote an article about MasterCard's pending IPO, and questioned, "How priceless is this IPO?" Click here to read. Moyer's was questioning the risk factors to the card association and its investors due to its "considerable litigation risks." As the lead plaintiff in this antitrust case, we haven't seen a significant change of direction and the case continues. So, why exactly is MasterCard a buy at $190.00, when within its SEC offering documents they, like Visa has too, explained that my victory could lead to the company's insolvency. Perhaps, the only thing that has changed are investor's memories of this case. With nearly 800 below WayTooHigh.com news and commentary updates, there is a wealth of reasons to be even more worried than was Forbes' reporter.

[commentary: WayTooHigh.com]

Visa's® 'Anti-Gay' TV Commercial Is Offensive On Many Levels (WayTooHigh.com)

Click here to view the YouTube-linked commercial.

Click here for an overview of the spot.

Click here to view other "Life Takes Visa®" spots.

Click here to read how Visa describes it in their online press release.

There are a series of similar Visa USA ads which depict the mental damage inflicted when consumers pay with paper rather than plastic. One spot shows a man buying a donut with cash, while a line of hungry people flash that same stymied look that an overwhelmed mom gives her kids when they start shouting in a supermarket. The message is "Life Takes Visa," but the reality is that if the donut shop is anything like the one next door to our Irvine, CA retail location, the owner is paying a hefty price when people use a credit card - especially a signature affinity card that come with even higher merchant rates. The fact is, with minimum payments, that donut shop owner may have just paid out more in interchange fees than the cost of the donut.

According to Mitch Goldstone, president and CEO of ScanMyPhotos.com and 30 Minute Photos Etc., "the Visa's® gang of advertising handlers presented inflammatory, anti-gay stereotypes in it's new kick-off to the 2007 NFL season with its 'When the Saints Go Marching In' TV commercial." Goldstone, who along with his partner, Carl Berman, are also the lead plaintiff's in the multi-billion dollar merchant interchange antitrust litigation and explained that another worrisome image from the commercial that also impacts all retailers is the new message that cash is bad.

The TV ad, airing during football games depicts how easy and fun it is to use your Visa payment cards to buy products, but when a preppy-looking man, in a pink shirt and sweater delicately wrapped around his neck becomes the standout, lone customer using cash, everything stops. It doesn't show how frustrated clerks get when the electronic payment network is slow or when the magnetic strip on the back of a credit card is worn, and thus requiring manual account number entry, which is one of the nearly one-hundred separate and higher interchange fees imposed on retailers.

In the TV spot, the cash-paying customer became the protagonist and tool for Visa's latest attempt to train consumers to use payment cards, rather than cash. The message is: if you dare to use cash, you will make everyone angry and turn against you. A clearer message to Visa and MasterCard is from us, your customers: Interchange fees are a $40 billion annual hidden tax on retailers, consumers and our economy and those abroad.

We are not the first to note how damaging this ad is.

Here are a few postings on the YouTube site:

"Homophobic"

" Nothing great, or even good, about this ad"

" [I]sn't it typically the other way around...takes longer waiting for a fool to pay with a credit card than cash.dumb commerical"

[commentary, WayTooHigh.com, via You Tube-linked Visa commercial]

The Flood of Banks' Windfall Profiteering at the Pumps Rises (commentary, WayTooHigh.com)

Oil leaped to a record high - surpassing $93 a barrel, which means the thousands of credit card association member banks are reaping even greater rewards as they charge a percent of each fill up from their credit card interchange fees.

During one U.S House hearing from time ago, the question was asked why the banks [Visa® and MasterCard®] are charging such high fees. That question was raised when oil was a tiny fraction of today's $93.00 a barrel.

We ask the question again.

• Whatever happened to MasterCard's proposal to cap interchange fees at the pumps at $50.00?
• Why, as best we can identify, did Visa remain silent and not join in the cap on interchange fees?
• If they can put a cap on gas station fees, why not all fees, since, it is our contention that the bulk of the actual costs are tiny (only about 13% of interchange fee costs are used to cover its transaction costs).
• If MasterCard could issue a press release that touted a cap on interchange fess at the pumps, why not in everything else too?
  
  Interesting that Visa enable its much smaller card association ally to come up with the cap in interchange fees at service stations without matching the program. If they were truly competing with each other, you would have thought the price elasticity would have snapped in place. By the way, whatever happened to that MasterCard's interchange fee limit, did it ever take effect that was promoted in their press release more than a year ago? [MasterCard was reported to explain that they were establishing this cap, but, was it ever imposed]?
  
  Remember: both Visa and MasterCard are/were owned by thousand of the same member banks, so they were more like a giant Starbucks-type business, then separate, like McDonald's and Burger King. Could you imagine if two independent, competing multi-national business conglomerates had the same board representation and the same group of owners? Think of Richard Branson's Virgin Airlines and its arch rival, British Airlines. I doubt they even talk to each other, other than in biting advertisements taunting each other, and thus much less likely to meet together and use their market power to illegally fix airline prices. Hey, that is our argument for how the electronic payment network regularly operate[s]d.
  
  MasterCard's® Planned Interchange Fee Cap For Gas Retailers (WayTooHigh.com) Dec 16, 2006
  
  [Commentary: WayTooHigh.com

Bank of America® Website: "Fee and Process Explained" (WayTooHigh.com)

One of the named defendants in our antitrust litigation has a website link and theatrical-like polished video to explain its fees and, in their words "how to prevent fees."

Lots of useful data, but conspicuously void are any links for merchants to help us, and therefore consumers, prevent our $40 billion annual hidden electronic payment fee.

In their words, click here to view.

[Commentary: WayTooHigh.com]

Fact: Visa®, MasterCard® and Its Member Banks Are Profiteering From Califorina's Wildfires (WayTooHigh.com)

Interchange fees did not make sense before, and it certainly does not now. As people across the country are reaching into their wallets, grabbing their plastic to make donations to the American Red Cross and other non-profit charities to help people affected by the California wildfires, guess who is reaping windfall profits?

That's right.

Unless the card associations are planning to rescind the merchant interchange fees for non-profits, they and its thousands of financial institution member banks are poised to reap mega bucks from this unfair and hidden tax. In one hand, some banks are issuing press releases proclaiming their donations to this cause, but in the other, larger hand, are the tainted currency being siphoned back from the interchange fees imposed on well-intended peoples' benevolence.

Way to go, Visa® and MasterCard®

The credit and debit card acquiring industry are now acquiring vital funds that are needed to go to the recovery effort, not into the bank vaults to help remedy their own mismanagement from their exposure to the sub prime housing loan crisis. We wonder if those donating money are aware of these fees?

Excerpt from About.com [Credit Card Processing for Nonprofits]:

• Unfortunately for nonprofits, most of their transactions are not done face-to-face and fall into this category called “card not present” or “mail order telephone order (MOTO)” transactions. MOTO processing rates can also vary substantially based on the type of card and your organization’s processing volume - but it will typically be to 1% higher than a physically swiped transaction. (Personally, I can’t imagine someone who has stolen a credit card going online to make a fraudulent donation to their favorite nonprofit, but credit card companies don’t see it that way.)

Read the following FAQ from the American Red Cross Website:

• "Why do you require a donation amount of $5? Like any other online credit card processing system we are charged by credit card companies. We don't want donors' well-intended gift to be offset by processing fees."

Interchange fees are seemingly forcing non-profits to violate their processing agreements. Like our retail and ecommerce business and millions of others, we are all precluded from requiring a minimum charge for an electronic transaction. Yes, in the American Red Cross' own words, they require a minimum transaction of $5.00. Does this mean that Visa and MasterCard will withdraw electronic payment support and pull the plug on their network because of this violation? We think not, but it is one more lapse and glaring reason why we question interchange fees. Listed among the 270 page MasterCard Merchant Rules Manual, is this warning the merchants cannot require a minimum transaction amount. [from the MasterCard website page 2-22. "9.12.3 Minimum/Maximum Transaction Amount Prohibited. A merchant must not require, or post signs indicating that it requires, a minimum or maximum transaction amount to accept a valid MasterCard card."]

Let's not just pick on MasterCard. On the Visa site, they have a link and recommendations of various charities that you can make instant donation to, including the American Red Cross. But, there is no mention of the fast that a percent of each transaction is not going to the designated non-profit, but rather being paid in merchant interchange fees. See link. On page 9 of the 135 page Rules For Visa Merchants document, they too explain that "Imposing minimum or maximum purchase amounts in order to accept a Visa card transaction is a violation of the Visa rules."

[Commentary: WayTooHigh.com]

Whare's The Outrage - $92.00 Oil! (WayTooHigh.com)

Barrel of Gas Reaches $92.00

Remember, when motorists choose credit cards as payment at the pumps, they are typically paying a percent of each fill-up in merchant interchange fees. How can the card associations, along with its thousands of member banks be so conspiring to engage in this windfall profiteering during our nation's economic energy crisis?

Few motorists understand that as gas prices reach new record levels, with crude oil now hitting $91.10, they are more likely forced to pay with plastic, as they simply do not have enough cash. Furthermore, record levels of profiteering is being reaped at their expense.

Where is the outrage?

Is anyone noticing that we are talking about billions of dollars in excessive hidden taxes on service station owners, motorists and our entire economy. The same is true overseas, as other nations face equally exaggerated fuel costs.

[Commentary: WayTooHigh.com]

Are Interchange Fees Set to Soar Upwards Again? (WayTooHigh.com)

For the past several months, we have been noticing the banks' missteps, from the sub prime mortgage fiasco, to plunging earnings. Today, Bank of America (a named defendant in our litigation) announced the firing of 3,000 people and that the head of its corporate and investment banking unit will leave too, following their recent 32% decline in profits for the quarter.

The question is whether the banks will again conspire to fix interchange rates at an even higher rate to cover their losses? How will they justify the new round of potential hidden merchant taxes? And, will anyone notice?

We will.

Also, we are just months from Visa's® planned IPO. If you thought the banks made bank from their selling off a percent of interest in MasterCard®, just wait for its big sister. Visa is three times the size of MasterCard, so the payoff to the banks could be even larger. And, just as with MasterCard's IPO, the Risk Factor warnings are equally as ominous; if we win our litigation, Visa could become insolvent, and a new cookie jar of windfall profiteering will have to be identified by the thousands of member banks that control the world's largest credit card association and electronic payment network.

[Commentary: WayTooHigh.com]

"Shops Denounce Credit Card Costs" (via BBC News)

Crude oil touches above $90 a barrel in electronic trading.

Interchange Fees Should Have Gone the Way of the IBM Selectric Typerwriters (WayTooHigh.com)

Unlike the fee structure of interchange rates, it is transparent that the named defendants along with their legal and advocacy teams are regularly reading WayTooHigh.com, yet, they remain nearly silent on many issues.

So, let us step back and remember the history of technology. Whatever happened to the millions of manual typewriters? How about the IBM Selectric typewriters - which were the staple for most offices just decades ago? The same question can be directed towards the manual credit card imprinters and sizeable carbon copy paper payment receipts?

All are now obsolete.

Today, you can buy a keypad for your computer for a couple of dollars on EBay, but only the Smithsonian in Washington is interested in those antiquated manual credit card imprinters. They all served a purpose, back when interchange fees were cost-based, but, one part is still around. The merchant payment system is still with us, and now amounts to a nearly $40 billion annual hidden tax that few retailers or consumers even understand.

Today, as the banks continue reporting dismal profits, due to the housing sub prime mortgage fiasco and other egregious mismanagement, the interchange boondoggle continues to fill an otherwise failing levee of corporate wretchedness. If it was not for the political and massive financial might of the banking industry (its member banks jointly owned Visa® and MasterCard®), these fees would have nearly disappeared.

Just as how the health care industry got a kick in the head after Michael Moore’s film "Sicko," perhaps that is what Visa and MasterCard needs too.

Today, due to extraordinary political and economic schemes and collusion, the interchange rates in the U.S. are more than double, and often even more than that of collections in other, economically and technologically less developed nations.

Today, their market power is desperately grasping to hold on to these fees, especially when their other sources of revenues are being threatened.

Today, just as the Selectric typewriter and other ancient-like products abdicated to new technologies and innovations, we still have confidence that businesses and consumers will soon wake up and recognize that the banks' electronic payment system are also relics; built on what we assert are illegal, price-fixing schemes to fill their vaults with billions of dollars that are being misdirected due to their absolute market power and price-fixing by agreement.

Whether it is forcing credit card paying motorists to toss over upwards of nearly two-percent of the total cost of a fill-up, to demanding that an inner-city mom, shopping at her local convenience store for a gallon of milk is helping to subsidize the premium affinity cardholders' free mileage trip to the tropics, this must come to an end.

During the previous nearly 800 postings by WayTooHigh.com over the past nearly three years, we have provided news, commentary and updates on what we assert is an extraordinary conspiracy by the Visa and MasterCard associations to wield their market power to fix the price of credit card interchange fees.

Visa is wrong.

MasterCard is wrong.

And, their member banks are wrong.

To quote from the movie "Network," the payments network has enraged merchants, who, like us are mad a hell and are not going to take it any more.


[Commentary: WayTooHigh.com]

Crude-oil futures close at record-high $89.47

Oil Surges Above $88 a Barrel (WayTooHigh.com)

Is it just us, or are others wondering how the banks and two leading credit card associations are realizing windfall profiteering from the now $88 a barrel cost of oil? We ask again: Why is it that motorists and service stations are forced to pay a percent of each credit card transaction to the banks?

[Commentary: WayTooHigh.com]

More Oil Profiterring. A Barrel of Gas Now at $86 (WayTooHigh.com)

Now we are at a record $86.00 for a barrel of gasoline. Why is it that the credit card associations are ablw to continue gauging service stations with a percent of each transaction at the pumps? As more people are forced to pay with credit cards, as gas prices continue to soar, the banks are reaping even higher windfall profits.

[commentary: WayTooHigh.com]

Will Banks Dip Into Interchange Cookie Jar to Help Earnings? (WayTooHigh.com)

We can't help but raise warning signs that the banks might look toward again reaching into their $40 billion annual interchange cookie jar to help fund their other disastrous fiscal flops. Citigroup, which is one of our named defendants in the multi-billion-dollar merchant interchange litigation just announced its its third-quarter profits slumped 57%. Will the banking giant and the thousands of other member banks seek to further choke retailers and consumers by scheming to further raise interchange fees? Remember, merchants overseas are also fuming over paying even less than half the U.S. interchange fees. We are poised and tracking our mail to see whether their hostility against their core business and consumer customers continues.

[Commentary: WayTooHigh.com]

Question from the UK: Why Are Rates More than Double in the U.S.? (WayTooHigh.com)

A good question.

Having just returned from addressing an international photo conference, I asked merchants and retailers I met during a separate visit to London, why their merchant interchange rates are more than half that in the States? The typical reply was one of confusion, especially because electronic payment technology and the card associations' network, they would think, was more advanced in the U.S., and thus should be even lower than their rates, which they too say are way too high.

[Average interchange fees in the UK is about 0.70% and 1.70% in the U.S., respectively].

[Source: WayTooHigh.com]

"Merchant Group’s Report to Lawmaker Triggers Interchange Tussle" (Digital Transactions)

Why Exactly Are the Interchange Fees More Than Double in The U.S. (WayTooHigh.com)

When people ask us about the antitrust litigation, one of the first questions is why exactly are rates in the U.S. more than double other nations' merchant interchange fees? They too do not understand how the world's more technologically advanced country is forced to pay about 1.7% from every credit card transaction in these fees, when less industrialized nations with inferior electronic payment network infrastructures are afforded such significantly lower rates.

During our trip to Europe, we are eager to get feedback from other retailers to better understand these out-of-control multi-billion dollar charges.

The reason? GREED and unbridled, price-fixing by agreement market power!

[Commentary: WayTooHigh.com]

"EU's Kroes to Take Decision on MasterCard Interchange Fees by End of the Year" (via Newstex)

Excerpt: BRUSSELS, Oct. 3, 2007 (Thomson Financial delivered by Newstex) -- EU competition commissioner Neelie Kroes said her competition services hope to complete an inquiry into MasterCard Inc (NYSE:MA) and rule on the credit card group's interchange fee payments network by the end of the year.

[Source: Newstex]

"Merchants Respond To Questions About Impact of Interchange Fees" (MPC)

Facts About Interchange Fees Contradict Card Company Claims

Washington, D.C. - October 1, 2007 - The Merchants Payments Coalition today delivered to members of the House Judiciary Committee's Antitrust Task Force a detailed report responding to questions about Visa and MasterCard's hidden credit card interchange fees raised by Representative Ric Keller, R-Fla., at a recent hearing.

"This report separates facts from fiction on credit card interchange practices," said MPC Chairman Mallory Duncan, senior vice president and general counsel at the National Retail Federation. "The credit card industry has made numerous questionable statements. We have attempted to set the record straight."

Duncan testified on behalf of the MPC during a July 19 hearing on credit card interchange held by the Antitrust Task Force, arguing that Visa and MasterCard practices in setting interchange rates constitute a violation of federal antitrust laws that costs merchants and consumers more than $40 billion a year. During the hearing, Keller identified a number of key issues on which merchants and witnesses for the credit card industry had made conflicting statements.

Following are key points raised by Keller, and MPC's responses. [Click here] for the full MPC report....

Merchants say Visa and MasterCard keep their operating rules secret, but Visa and MasterCard say the rules are posted on their web sites. Fact: Visa and MasterCard both post excerpts from their rules on their web sites, but not the complete rules needed for a full understanding. Visa offers to show merchants a fuller set of the rules, but only if they sign a non-disclosure agreement prohibiting discussion of what they see.

Merchants say they are not allowed to offer cash discounts, but Visa and MasterCard say cash discounts are allowed. Fact: Federal law prohibits a ban on cash discounts, but credit card company rules make cash discounts extremely difficult to offer. Visa in particular has attempted to characterize some cash discounts as a prohibited surcharge on credit card use, and has threatened some merchants with fines of $5,000 a day for offering cash discounts.

Merchants say interchange rates are non-negotiable, while Visa and MasterCard say they can be negotiated. Fact: Merchants are not part of the process when interchange rates are set and cannot negotiate interchange rates with Visa or MasterCard. Courts have held that Visa and MasterCard dominate the credit card market, and the Kansas City Federal Reserve found that the popularity of cards among consumers gives merchants no realistic choice but to accept Visa and MasterCard regardless of rates.

Merchants say interchange fees hurt consumers while Visa and MasterCard say interchange fees benefit consumers. Fact: Interchange fees do pay for rewards programs offered by credit cards, but the fees mean that all consumers pay for rewards whether they take advantage of them or not. All consumers shoulder the burden of interchange as the fees are passed along in higher prices, with the average family paying an extra $300 because of interchange fees in 2006.

Visa and MasterCard claim retailers are asking for price controls, while retailers say they want only competition. Fact: Merchants have not advocated price controls, either in testimony before Congress or in meetings with members of Congress. Claims that merchants are advocating price controls are false.

Visa and MasterCard say retailers who accept any Visa credit card should be required to accept all Visa credit cards and the same for MasterCard, while retailers say they should be allowed to choose which cards to accept. Fact: Visa and MasterCard each have an "honor all cards" rule requiring merchants who accept any credit cards under the Visa name or MasterCard name to accept all credit cards issued under that name. Merchants believe this is a key part of the problem, because even if banks competed to offer lower interchange rates, merchants would still be required to accept those with high interchange rates. Also, card issuers do not currently provide merchants with the information necessary to know the exact interchange rate being charged when a card is presented at the register.

The MPC is a group of nearly 30 associations representing retailers, supermarkets, drug stores, convenience stores, fuel stations, on-line merchants and other businesses that accept debit and credit cards 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 more information, visit www.unfaircreditcardfees.com.

[Source: MPC, press release]

"Sleazy Credit Card Tactics Under Fire" (via MSN)

[repost, May, 2006] MasterCard's® Legal Bill Could Be $26 Bln (from report in CardLine)

More Bank Profiteering From Record Gas Prices (WayTooHigh.com)

Regularly, interchange fee increases take place in the Fall and mid-Spring. We are closely monitoring to see whether Visa® and MasterCard® will be even more brazen and again hike their fees. But, one sector of our economy is posed to create unheard of profiteering for the card associations and its tens-of-thousands of member banks. We also wonder if the financial turmoil in the world credit cards, might create an opportunity for the banks illegally raise prices by agreement as they seek new profits by raising their interchange fees to cover the mortgage meltdown?

As gas prices continue to soar, so too is interchange fee profiteering, due to what we assert are illegal price-fixing by agreement and absolute market power (Visa and MasterCard's network controls about 80% of the electronic payment business).

Rather than rescinding their unjustified hidden-taxes on motorists and our entire economy, we are alarmed to learn that, according to The Wall Street Journal (page 1. Sept 29) [click here to read the article - subscription required], gas prices could rise to $100.00 a barrel. The two WSJ reporters, Peter Fritsch and Kelly Evans, explained how the U.S. economy could withstand $100 a barrel oil, but they were absent in also mentioning exactly what that stratospheric rate would do to the banks' bottom line. Nor did they explain how the banks can possibly justify this extraordinary profiteering as our nation faces such a burdensome economic energy crisis.

Forget, for a moment, ExxonMobil and other gas companies' earnings, and pause to ask why exactly are credit card interchange fees based on a percent of each sale? Even Realtors are dealing and lowering their once standard 6% commissions; in this case the banks are reaping about 1.7% off the top from every credit card charge at the pumps. Could they be earning as much as $2.00 - $3.00 from every fill-up, especially as motorists are now more inclined to use plastic, as they do not have enough cash on hand?

Last year, MasterCard announced they were instituting a $50.00 interchange fee cap at the pumps. Visa, however, has been silent on the issue, and we are unsure whether the fee limit by MasterCard ever took effect.

Either way, since many of the same banks which control MasterCard, also have stakes in Visa, it is really a giant shell game anyway.

[Commentary: WayTooHigh.com]

The Battle Against Interchange Fees is Global [See Website: StopUnfairCardFees.eu

WayTooHigh.com - The Credit Card Interchange Report has been providing daily news and commentary updates on our battle against merchant interchange fees for nearly 2 1/2 years, but our cause is not just domestic within the United States. EuroCommerce is hosting an outstanding website that further cements the critical multi-billion dollar issues that affects all retailers in Europe and across the globe. Next month, we [30 Minute photos Etc. and ScanMyPhotos.com] will be attending and speaking at a photo industry convention in the UK and will be interested in gaining first-hand prospectives from other retailers on how the interchange extortion is affecting them as well.

The below highlights are from the StopUnfairCardFees.eu website. Click here to read more.

• Did you know? Visa and MasterCard argue that the hidden fees - which cost Europe €25 billion every year - are essential to run card schemes. Why then are there some card schemes in Europe which operate successfully without hidden ‘interchange’ fees?
• “My bank told me the fee covers processing costs for Visa and MasterCard. But I read that only 13% of the fees go toward these costs, with the rest going to bank profits, and rewards for the select few cardholders. What’s the deal?”
• Europe’s retailers want the best for Europe’s shoppers – in terms of price, quality, service and choice. But prices in Europe are artificially inflated because of hidden fees for debit and credit cards – fees which all shoppers end up paying for. We believe Europe’s shoppers have the right to know …
• What is happening in Europe is not an isolated case. Visa, MasterCard and the banks that hide behind them try around the world to continue and spread their anti-competitive activities. Yet in some countries, they are no longer able to get away with it.
• According to US Senator Arlen Specter: “We may need to modify our antitrust laws to stop credit card companies from engaging in activities to gouge and jack up prices.”
• According to Philip Lowe, Assistant Governor of the Reserve Bank of Australia: “These fees are not subject to the normal forces of competition and in the RBA’s view were distorting the use of payment methods in Australia.”
• MasterCard and Visa and their interchange fees have also aroused the interest of regulatory authorities and central banks in a range of further countries across the world. These include: Brazil, Columbia, Mexico, South Africa, Singapore, Switzerland, and Israel.
• What is happening in Europe is not an isolated case. Visa, MasterCard and the banks that hide behind them try around the world to continue and spread their anti-competitive activities. Yet in some countries, they are no longer able to get away with it.
• Why is it anti-competitive? Unless constraints are imposed by regulators, payment card companies and their banks can increase interchange rates at any time by any amount. In the words of the European Competition Commissioner, Neelie Kroes, “these high fees are a result of a lack of competition in a market where 95% of cross border payments in Europe are made by two companies. The situation is even bleaker in some Member States, where there is only one single acquiring bank servicing retailers.”
• Why are interchange fees unfair? First of all, Visa and MasterCard do not inform customers of these interchange fees, they simply set them with the banks behind them and charge retailers and their shoppers accordingly. We believe you have the right to know more about these fees. It is even more unfair for shoppers who do not use the credit or debit cards. That’s because these hidden fees are not charged just to cardholders - that is forbidden the rules of by some card schemes and banks. The high cost of card payments must be passed on across all purchases. This drives up the cost of goods and services for all consumers whether they pay with plastic or cash. This has a serious knock on effect for the wider economy.
• What’s it about? Whether you use a credit card or not, you pay a hidden fee on virtually every transaction you make. The fees have an inflationary effect and they add up. They cost European shoppers tens of billions of Euros every year.

[Source: Above abstracts from StopUnfairCardFees.eu]

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

As our company continues to make news for the super-fast photo scanning business we built that is transforming the photo imaging industry and using technology to slash prices for preserving generations of photo snapshots, we wondered why technology has not also led to rock-bottom and tumbled-down interchange fees?

To be more transparent and divulge just how ghoulish this hidden tax is, Visa® and MasterCard® should post the exact interchange fee for each transaction as a separate item on every debit and credit card receipt. We first raised this issue in January, 2006, but they seem too busy figuring out how to go public to distance the banks from our alleged antitrust violations. If they would only pause from what we assert is their attempt to pass along the liability from this litigation onto the public, and instead, agree to post the exact interchange fees on every receipt, then, all merchants and cardholders would understand why we are so passionate about this issue. There would no longer be a hidden tax, but, rather a very vocal cascade of resistance against the peddlers of these unfair fees.

Why are the merchant interchange fees about 1.7% in the U.S. and as low as zero in other nations? And, as other electronic transactions have been slashed too rock-bottom, why have some of their rates [ex. debit cards] tripled in the past 8-years?

Let us pause for a brief study break and review the historical way of sending ["transmitting"] a traditional letter and the processing of a charge slip. In the previous decade, if you wanted to send a letter, you generally bought stationary, an envelope, postage and drove to the Post Office to mail it; days later it was received. Also about ten years ago, merchants, like us, had to stock up on thick, multi-page, carbon-copy charge card receipts, swipe the payment cards through a manual imprinter, mail it to the processing company on the other coast [Florida]. Then, days later, the transaction - less a substantially lower interchange fee than today - was credited to your bank account. As technology advanced, instead of lowering interchange fees, it has actually leaped ahead.

Today, we all use email, and essentially, it is free. Could you imagine if the two leading credit card associations and its thousands of member banks were also involved with the exploration of the Internet? Using their surreptitious market power and pricing domination, every electronic [email] "letter" would come with a beefed-up fee. But, the actual cost to use the Internet network to transmit an electronic message, must be about the same as the cost to transmit an electronic payment on its network, so why are the banks still granted the potency to exert such immense multi-billion-dollar hidden taxes on merchants, cardholders and our economy?

[Commentary: WayTooHigh.com]

"Dot-Com" Bust, Sub-Prime Mortgage Collapse, Is Interchange Scheme Next? (WayTooHigh.com)

Is another multi-billion dollar bubble about to collapse?

Hundreds of years ago, during Holland's speculative tulip bulb craze that gripped the nation, the laws of economics prevailed and the market for flowers collapsed. During the closing days of the last decade, we again witnessed a market failure from the Internet "dot.com" fiasco. This summer, it was the unchecked financial policies that led to our nation's housing predicament.

Where were the regulators when U.S. President Bush was encourage home ownership? Now, we are saddled with billions of dollars in losses because greed by the financial institutions was elevated above smart planning.

The same thing is again happening with merchant interchange fees.

Due to the banks' unbridled pricing controls over merchant interchange fees, what use to be cost-based is today a fiefdom for non-stop rate increases that retailers and consumers are unable to control. There are no checks to this madness; Visa®, MasterCard® and its thousands of member banks are today's new enemies battling its two core customers - retailers and cardholders. At least with the tulip craze in the early 1700s, there was a fragrant aroma, while today's threatening interchange fees and its electronic payment network is nothing more than a rotten, unfair conspiracy to unlawfully fix prices.

Studying MasterCard and now Visa's IPO "Risk Factors" says it all and flashes the most serious of warnings as they foreshadow what might just happen: the two leading credit card associations could become "insolvent" ["Interchange fees are often the largest component of the costs that acquirers charge merchants in connection with the acceptance of payment cards," according to Visa's SEC filing]

If our class action prevails in this antitrust litigation, the same outcome as with tulip bulbs in Holland, Internet stocks on Wall Street and the housing prices in southern California and other speculative markets might just be a giant foreshadowing of what could happen to this interchange fee debacle.

Today, there is little justification for any interchange fee, let alone upwards of $40 billion dollars each year.

Today's market power of the general purpose card network is without justification. Just look at other nations, even those less industrialized ones and ask why their interchange fees are so much lower than the 1.7% in the U.S.

And, why again are interchange fees for the very costly check writing and clearing process also zero in the U.S.?

[Commentary: WayTooHigh.com]

"Paper or Plastic? Retailers Struggle With Fees as Customers Increasingly Use Bank Cards Over Cash" (The Patriot Ledger)

The following is a reprint from the Steve Adams reported article in The Patriot Ledger on Saturday, Sept 22, 2007 - The Patriot Ledger

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Retailers say they’re the biggest tax you’ve never heard of: They’re transaction fees that credit card companies and banks charge merchants every time a customer swipes a credit or debit card to pay for a purchase.

As dozens of lawsuits challenging the fees grind through the courts and Congress holds off on any action, many mom-and-pop merchants are taking matters into their own hands. Violating the terms of their card agreements, many are requiring minimum purchases - typically $10 - for customers using plastic.

Rockland-based Tedeschi Food Shops has received at least two complaints in recent weeks about franchisees setting minimum purchases, executive vice president Robert Tedeschi Jr. said. The company has notified them that they are violating Tedeschi’s policy.

Still, Tedeschi said he sympathizes with the plight of independent merchants, who lose money every time a customer pays for a small transaction with a card.

‘‘We put a notice out to all franchisees that you can’t do it,’’ Tedeschi said. ‘‘I hate to tell them that, because it’s just killing them.’’

Tedeschi Food Shops typically would make a profit of 2 cents on a $3 gallon of gas, but transaction fees gobble up 9 cents per gallon, causing shops to oftentimes lose money on gasoline sales, Tedeschi said.

As plastic threatens to overtake greenbacks as the predominant form of payment in stores, the stakes are high for merchants, banks and card companies.

A Morgan Stanley report indicated that average transaction fees rose from 1.6 percent of a purchase in 1998 to 1.75 percent in 2004. The report said the dollar volume of fee transactions grew from $9.4 billion to $17.5 billion during that period, through a combination of rising fees and more card transactions. The Merchants’ Payment Coalition, a group of retailers organized to fight the fees, estimates interchange fees hit $30.7 billion in 2005.

Transaction fees consist of three elements. When a customer pays with a debit or credit card, the bank that issued the customer’s card charges the store’s bank a ‘‘merchant discount fee’’ and an ‘‘interchange fee’’ to cover the cost of issuing cards and collecting payments. The merchant’s bank then imposes an additional fee, which is also charged to the merchant.

Credit cards have dozens of fee structures that incorporate factors such as the issuing bank’s fees, whether the customer pays with a credit card, a debit card with signature or a debit card with pin code, and how often the merchant reconciles transactions. Rewards cards typically have higher fees than others.

Regardless of the details, fees can wipe out profit margins and make minor card purchases a losing proposition for merchants.‘‘

If somebody puts a pack of gum on the counter and pays with a credit card, you’re better off if the person just stole it,’’ said Jeff Lenard, spokesman for the Washington-based National Association of Convenience Stores.

According to a survey of its members, convenience stores and gas stations made $4.8 billion in profits in 2006, a figure that was diminished by the $6.6 billion they paid in card fees.‘‘

Essentially the credit card companies made more at the stores than the stores themselves,’’ Lenard said.

The Electronic Payments Coalition, which lobbies on behalf of banks and credit card companies, disputes that fees are inflated and says government regulation would reduce choices for consumers. Executive Director Peter Madigan said the fees reflect investments by banks and credit card companies in technology, enabling millions of transactions to be processed in seconds. Fees are overhead costs for merchants, enabling them to attract business they otherwise wouldn’t get, Madigan said.‘‘

We think it does a lot for the merchant. It brings you in as a customer if you’ve got no money in your pocket,’’ he said.

Critics say Visa and MasterCard enjoy a virtual ‘‘duopoly’’ over electronic payments, enabling them to jack up fees out of proportion to their administrative expenses. The House Judiciary Committee heard testimony in July that the fees violate antitrust laws, and Congress continues to study the issue.‘‘

It’s been a very tight relationship and they have had the ability to do whatever they want with transaction fees,’’ said Pete Bartolik, spokesman for alternative transaction processor Tempo Payments of San Mateo, Calif. ‘‘ The more people use (debit and credit cards), the more prices go up.’’

Madigan said there is ample competition within the industry, with more than 14,000 banks offering debit and credit cards.

Rosetta Jones, vice president of Visa USA, defended interchange fees.‘‘

Visa will continue to protect consumers against some merchants who want to shift their cost of doing business onto consumers by charging a check out fee,’’ Jones said in a prepared statement. ‘‘This approach has already been tried - and according to reports failed - in Australia where check out fees have resulted in increased costs and fewer choices for cardholders.’’

In the meantime, retailers such as CVS and Quincy-based Stop & Shop Supermarket Co. have launched debit cards under their own brands with alternative transaction processors that offer lower fees.

Stop & Shop in 2005 launched a ‘‘PayVantage’’ card that links directly to customers’ checking accounts and also stores their loyalty card information. The transactions are processed by First Data Corp., a Colorado financial services company. After a test-launch at 12 Massachusetts stores, the card is now available at 30 stores.

On Sept. 10, Woonsocket, R.I.-based CVS began test-marketing a loyalty ‘‘rewards payment’’ card at 141 stores in the Indianapolis area. The cards link directly to customers’ checking accounts, cutting Visa and Mastercard out of the loop. It also stores information on purchases typically saved on a CVS ExtraCare card, serving both as a loyalty card and a debit card.

The card is issued by Prospect Heights, Ill.-based HSBC Finance Corp., which is trying to set up loyalty debit card programs with other retailers.

Tempo Payments was founded in 2000 to offer merchants an alternate card processing system. The company charges retailers a flat 15-cent fee per transaction, said Bartolik, its spokesman.

Issued by individual retailers under their brand name, the cards are accepted at 200,000 retail locations nationwide including such chains as Best Buy, Circuit City, Marshalls, T.J. Maxx and Talbots. Customers’ cards can be used not only at the retailer that issued the card, but any other retailer that accepts Tempo.

Boca Raton, Fla.-based National Payment Card has launched its own ‘‘decoupled’’ debit cards that link directly to customers’ checking accounts and is targeting gas stations as retail partners. The company says it can reduce merchants’ transaction fees by more than 80 percent.

Retailers, in turn, typically offer three-cent-per-gallon discounts on gasoline to encourage customers to sign up for the service.

In the 21 states that embed magnetic strips on the back of driver’s licenses, customers can enter their license information on a Web site and swipe the license at stations as a form of payment.

NPC processes the transactions through the Automated Clearing House, a network commonly used for direct deposits and automatic withdrawals from bank accounts.

The company counts several hundred gas stations in southern states as customers, CEO Joe Randazza said. He predicts explosive growth because of merchants’ concerns over fees.‘‘

This is the second-largest expense to a gas merchant (after the cost of fuel),’’ he said.

[source: Copyright 2007, The Patriot Ledger]

Where Are The Pro-Interchange Fee Blogs? (WayTooHigh.com)

Like in baseball, it is easy to keep score, just look at the scoreboard. In politics, there are polls. For interchange fees, there is little other than those regular notices of fee increases.

As retailers continue battling against the two leading credit card associations and its member banks, it is also easy to keep score.

With nearly 800 postings on WayTooHigh.com - The Credit Card Interchange Report, we have yet to profile a single pro-interchange fee blog. Not one. Well, there is always that "pro consumer," "pro competition" group that enjoys the financial support of Visa, but that really shouldn't count.

Where are the merchants championing 1.7% interchange fee rates, and challenging WayTooHigh.com. Where are U.S. retailers thanking Visa® and MasterCard® for charging among the highest rates in the world, while abroad, the interchange fees are 0.7%, 0.5% and even 0.0% - there are no interchange fee for debit PIN-based cards in Canada.

The reason for such silence?

Merchants understand they are being taken on a ride when cardholders present their affinity frequent flyer cards. The merchants, and thus the consumers are paying for these perks and the nearly $40 billion a year in interchange fees.

Since we were the first to launch the merchant interchange litigation back in mid-2005, there have been no pro-interchange fee blogs that we are familiar with. That speaks volumes about our cause and the unfair fees.

*** Stay tuned for our regular news and commentary updates on Visa over the next several months as it attempts to follow MasterCard and try to distance its member banks' liabilities.

[commentary: WayTooHigh.com]

"Mastercard Paid Lobbyist $280,000" (via AP)

"Credit Card Fees Eat Up Merchants’ Profits" (Citizen-Times.com)

From the John Boyle reported Citizen-Times' merchant interchange article, we share this observation about who actually receives the $40 billion dollars each year from interchange fees.

Someone does!

As MasterCard® spokeswoman, Sharon Gamsin was quoted in the article, MasterCard [and the Visa® network] "does not receive revenue from interchange — it is a payment between acquiring and issuing banks to balance costs in the system.” However, let us look at who owns [owned] the two leading credit card associations. That's right! The member banks - the same ones who stand accused by us and millions of retailers through our class-action antitrust litigation of illegal price-fixing.

Many banks are double billing; they are both the "acquiring" and "issuing" bank, so how exactly can they justify the double-billing? If they ever get around to answering that, then, question number two: How are the banks justifying they deserve a percent of evey credit card sale at the gas pumps? Oh yes, when you can illegally fix the prices and own the network, you can get away with anything as long as your customers don't notice. As the first of the new lead plaintiff's, having filed the new merchant interchange class-action in 2005, we notice and are asking the questions.

Even as Visa prepares to follow MasterCard towards seeking to protect its current owners (the banks) from this multi-billion dollar potential liability, whether you say that the card associations or the banks directly earn the interchange fee is more about semantics and the interrelationship between the two.

[Commentary: WayTooHigh.com]

"Study Looks at Merchants’ High Credit Card Fees" (The Journal Record)

"Crude-oil Futures Hit New High Above $83 a Barrel" (via MarketWatch)

With new record gas prices, motorists are forced to more often than ever have to use plastic, rather than pay with cash, as the amount of each fill-up rises. This means that in many cases, the credit card associations' member banks are reaping even more grossly-inflated interchange fees at the expense of all consumers; they continue to reap windfall profits during this national economic energy emergency, and, seemingly, nobody is noticing?

[Commentary:WayTooHigh.com]

"Interchange Fees Are Really "Sky High" (Commentary:WayTooHigh.com)

During an evening flight last evening down from the Bay Area, the pilot on American Airlines announced that they were conducting a test for a new service and that only credit and debit cards would be accepted for in-flight purchases. Imagine that - no cash. The flight attendants used wireless credit card terminals to swipe the magnetic strips on the cards.

[Commentary: WayTooHigh.com]

Barrel of Gas at $81.90 !!!

More windfall profiteering for interchange charges at the gas pumps; A barrel of gas surged to new trading highs today of $81.90 on the New York Mercantile Exchange. How are the credit card associations and its member banks justifying their extraordinary profiteering during our nation's economic energy crisis?

[Commentary: WayTooHigh.com]

Super-charged Greed! (Commentary, WayTooHigh.com)

[repost from April 11, 2006]

"Visa's IPO Use of Proceeds Plan and Interchange Overview (commentary, WayTooHigh.com)

Many of the same banks that owned MasterCard®, own Visa®. And, as with the earlier MasterCard IPO, according to a Reuters news report, Visa plans to set aside a portion of its IPO windfall to open "an escrow account to help cover potentially hefty legal bills."

As mentioned in the prior posting, Visa explains in its SEC filing that among the risk factors for an investment in the company is that they may become "insolvent" due to the merchant's interchange litigation victory. Is this a possible reason for the IPO - to transfer liability onto shareholders and restructure the banks ownership to limit their liability? After all, according to the filing, "Interchange fees are often the largest component of the costs that acquirers charge merchants in connection with the acceptance of payment cards."

For those unfamiliar with our battle against Visa, MasterCard and many of its member banks, here are some points of interest:

• The payment card interchange fee and merchant antitrust litigation alleges anticomptitive, antitrust violations by Visa and MasterCard, which is made up of thousands of banks
• Many banks sat on both the Visa and MasterCard boards and stand accused of illegally fixing the interchange fees by agreement and in coordination with each other.
• Many electronic payment transactions were handled by the same banks, as the issuer and acquirer, meaning they get fees twice.
• There is no real competition; Visa and MasterCard maintain an 80% market power over electronic payment processing.
• Interchange fees have more than doubled in the last 10-years.
• Few customers know about interchange fees because it is virtually impossible for merchants to tell customers what the exact fee is.
• Every consumer pays for these hidden credit card fees, even cash customers because the cost is built into every product - a gallon of milk bought with cash by a mom is also paying to award premium signature card holders' bonus mileage to Europe.
• Interchange fees are one of the worst and most unfair fees paid by American consumers - it's more than six times what people paid in ATM fees.
• Huge profits: Even though the actual cost to process a $1 transaction is virtually the same as that of a $10,000 transaction (buy a soda or a Cartier watch), the interchange fee is based on a percentage of the total. Even Realtors lowered their commissions when housing prices soared.
• The interchange fees are far higher than the actual cost o the transaction they are meant to pay for.
• The technology used to process credit card transactions are today more efficient and less expensive.
• Why are interchange rates higher in the U.S. in most other industrialized nations?
• U.S. interchange fees are close to 2%, while other countries, like the UK are typically 0.7% and Australia averages 0.55%.
• Did you know that merchants are forbidden from disclosing to consumers the fees that are charged?
• Behind closed doors, Visa and MasterCard meet to increase these anti-competitive hidden fees. It seems they are regularly being raised, not lowered as technology creates more efficiencies for speedier electronic payment processing.
• We understand that these price-fixing practices are in violate antitrust laws.
• Few things are more anti-competitive than the credit card market - virtually every other marketplace lowers prices because of competition.
• Study the market dynamics of other counties with significantly lower interchange rates to understand that the banks and card association are still doing well and they have not experienced disruptions in transaction handling processes, despite lower rates.
• We assert that the banks which make up Visa and MasterCard have colluded to set these fees which in any other industry would be in violation of federal antitrust laws.

Repost from Prior Summary - Briefing on Interchange Issues (WayTooHigh.com)

[Commentary: WayTooHigh.com]

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

It weighs in at more than 400 pages, but among the critical pages to read begin on page ten [risk factors] of Visa, Inc's® S-4 Registration Statement in advance of its planned IPO early next year.

We remember years ago when the banks explained that interchange fees helped cover losses from fraud, yet that concern is way down on the factors threatening this offering. Instead, this phrase, "...cause us to become insolvent" is higher on the list of risks and is associated with the merchant interchange multidistrict litigation, which might force Visa Inc. to pay substantial damages.

Last evening, CNBC asked whether Bank of America® was using its new [nearly doubling] $3.00 ATM surcharge for non-customers to bail out from the sub prime mortgage disaster? A bigger question is whether the banks, many of which had also owned MasterCard, and reaped billions after its IPO, are using this IPO to not just bail out from their mortgage malaise, but to run for the exit and pawn off the potential litigation liability on to the public? But, remember, the alleged crime of illegal price-fixing by agreement did not occur when the public owned the stock, but rather, under the banks watch.

The CNBC segment discussed how non-customers using the Bank of America ATM network are paying fees twice; talk about double dipping. The same happens billions of times each day with the Visa and MasterCard® payment network too. Interchange fees are paid twice, once to the issuing bank, and then to the acquiring bank, and in many cases, it is the same bank!

[Source: WayTooHigh.com]

"Visa Wins OK From SEC As It Readies IPO" (via Reuters)

"Crude Futures Mark First-Ever Close Above $80" (MarketWatch)

"Bank of America Raises ATM Surcharge" (USA Today)

The Robber Barron's Had Nothing On This Interchange Fee Heist (Commentary, WayTooHigh.com)

This is shocking to merchants; it doesn't make sense, but it is making lots of dollars....

Crude-oil futures climbed into uncharted territory and have now reached $80.00 a barrel...

The result is record, windfall profiteering by Visa®, MasterCard® and its member banks.

Why exactly are interchange fees based on a percent of each transaction.

What, do they think they are selling real estate?

Even real estate brokers lowered their 6% standard commissions when housing prices reached record levels.

What are the banks doing to help during this fiscal energy crisis.

Our earlier proposal to the CEO's of Visa and MasterCard to rescind interchange fees at service stations remains one immediate solution.

See these prior WayTooHigh.com related posts

"Credit Card Fees Siphoning Gas Stations’ Profit" (The Times-Tribune)

An Orgy of Credit Card and Bank Profiteering From Record Pump Prices (WayTooHigh.com)

Oil Surges Past Record High, Above $78 a Barrel; Yields More Windfall Profiteering For Banks (WayTooHigh.com)

Visa® and MasterCard® About $1.50 Per Fill-up

Open Letter to Visa® CEO: suspend gas station credit card interchange fees to help motorists save ~$1.50 per fill-up

"More Windfalls At The Gas Pump" (Forbes)

[source: WayTooHigh.com]

"BASIC INSTINCTS; Cards Train Teenagers To Use Plastic" (NYTimes.com, Aug 25th)

Debit cards targeted at teens could train them how to handle money, but there are better ways...

"Oil Hits Record Near $80 On Tight Supply" (via Reuters)

As our nation faces another economic energy crisis, what exactly are Visa®, MasterCard® and its member banks doing to help? The reality is that as gas reaches $80.00 a barrel, the service stations are forced to pay in most cases, a percent of every tank fill-up in interchange fees. The result is that the banks are realizing a huge multi-billion dollar windfall profit at the expense of motorists and all consumers. Is this how they are helping to cover their real estate loan losses?

Let us keep in mind that the financial credit crunch caused by sub-prime loans is affecting the banks. The Wall Street Journal (Sept 8, page B-14) )reported that the losses to banks could be about$100 billion. Yes, the banks have reserves, but we wonder how that will be impacted when our litigation is resolved; from where will the money come from?

[Commentary: WayTooHigh.com, via news report from Reuters]

"The Dark Secrets of Debit" (Consumer Reports.Org)

The September issue of Consumer Reports details what we have long been warning, that banks try to force consumers to get debit cards, but use it as a credit card.

Click here to view the entire story about "why do banks push debit cards for every purchase you make? Because they stand to make millions--largely at your expense..."

"Debit rewards: More glitter than gold."

According to Consumer Reports, "a Visa Extras roundtrip airline ticket from the U.S. to Europe would require 200,000 points--or $400,000 worth of spending on those debit cards for a ticket with a value capped at $1,100."

[Source, via Sept issue of Consumer Reports.Org]

The Pigs of Greed (Commentary: WayTooHigh.com)

You would think that $40,000,000,000 [ that's 40-billion dollars in annual interchange fees] would be enough to fill the bellies of greed by the two leading credit card associations and its member banks, of which are the defendants in our antitrust price-fixing litigation, but no.

Here is another example of unbridled greed and growing buffet of piggishness.

Last Saturday, we receive a call from a customer in Florida who was not pleased with the nearly 1,000 pictures we scanned for her. Like all orders, it was received, scanned and mailed back the same day, but, she said the scans were "too dark."

Because ScanMyPhotos.com retains all images for 60-days, a quick look at her order revealed that the scans were perfect. But, we've been in business for 17-years because "word-of-mouth" and credibility matters most. In this case, without any discussion, we advised the customer that an instant full-refund was just applied to her charge card. We took a full loss on the order [$49.95, plus delivery charges]. When we issued an electronic refund, it occurred to us just how piggish the merchant interchange cartel is. While we issued a full-refund, the interchange fee charged, remained.

FACT: There are no refunds to cover merchant costs for interchange fees when refunds are initiated.

Nice going, Visa and MasterCard! Can't wait to read read your next PR and marketing profiles about how business friendly you are.

[Source: Commentary, WayTooHigh.com]

We Pause: In Memory of "9/11"

[Photo: EPICCUSA.COM]

In tribute to those who lost their lives, family members and to all of us, we pause in memory of the events of September 11, 2001.

For those WayTooHigh.com readers who might not be familiar with several of our prior grassroots advocacy campaigns, including "Fly With Courage," where we flew from Barcelona to New York City and Los Angeles on September 11, 2002, when few passengers had the courage to travel, we share these memories with you. On that day, the airlines and our nation's commerce were again threatened due to fears placed on the first anniversary since "9/11." The planes we traveled on were empty, the immigration and customs areas empty, airports empty, but our message was heard that it was safe and vital to support the airlines and The Big Apple - as part of our efforts, when we arrived in Los Angeles late that evening, we were profiled on ABC News.

Like everyone, and as native New Yorkers, we too were moved by September 11, 2001 and spent the next two months working to launch a campaign that brought thousands of people from across the country to The Big Apple on Veteran's Day - two months to the day after "9/11." Our journal from that emotional pilgrimage to support the airlines and commerce in New York City can be seen at: epiccusa.com."

(Photo: EPICCUSA.COM)

The City of New York invited us to Ground Zero - see photos

Letters from [current presidential candidate and former] Mayor Rodolph Giuliani, [current SEC Chairman] Chris Cox and others are also posted on the site.

[Source: Carl Berman and Mitch Goldstone, co-founders of EPICCUSA.COM and co-editors of WayTooHigh.com - The Credit Card Interchange Report]

Presidential Candidate Christopher Dodd on Interchange Fees (via UnfairCreditCardFees.com)

Presidential candidate and Senate Banking Committee Chairman Christopher Dodd, D-Conn, recently addressed interchange fees during a Senate hearing. Click here for complete transcript.

"And lastly, I would be remiss if I did not mention one issue likely not to be explored today-- credit card interchange fees. These fees are imposed on merchants and consumers by banks and card associations when a credit or debit card is used to pay for a purchase. Interchange fees are growing exponentially– and the costs associated with these fees are expected to be between $30 and $40 billion this year alone. These opaque fees, assessed on merchants, are passed on, in part or whole, to consumers who have no knowledge or understanding that a fee is even a part of the cost of bread or milk, or any other consumer product. I believe that this is another area that this Committee should examine as part of the series of hearings on credit cards. With that, I would like to introduce the witnesses before the Committee."

[Source: UnfairCreditCardFees.com link]

Presidential Candidates' Position on Credit Card Fees

We will begin posting comments and views as the presidential candidates begin to address credit card fees.

As the first entry, we came across this blog posting from myDD.com about former Senator John Edwards' support of lowering credit card fees. The blogger posted the below comments to address additional concerns that would help the candidate "win over small business owners:"

See this link for complete comments by the Blogger.

Assure that all credit card fees are cost-based.

In short, any fee charged by a credit card company must a) be justified, and b) reflect the cost of whatever service is being performed that the fee is being charged for. This is an issue for the Consumers Union's credit card agenda and for merchants especially. And it's merchant fees where Edwards could find new headway.

If you haven't followed my diaries on the subject of the interchange fee, see my first one here: "The Biggest Reverse Robin Hood Scheme You've Never heard Of." If you've never heard of it, that's not your fault -- the banks which control the credit card associations prefer it that way. So while proposal #5 is just a good idea in any case, it might carry specific political benefits if he put some emphasis on that fee in particular. In practice, this would likely remove the interchange fee from the reward card equation. Rewards on Gold and Platinum cards come from the fees incurred by these transactions. That's also where the banks' never-been-higher profits derive. But if it costs $.50 to send the payment through, don't worry -- they'll take a lot more.

I'm not sure where now but I read recently that only 13% of interchange fees actually goes towards paying the processing transactions -- the rest goes to fund rewards as mentioned above as well as advertising and junk mail. Transactions should be no more expensive than they need to be. The fee as it was originally created was a necessary measure to cover costs. No one here is saying there shouldn't be any interchange fee (although some foreign governments are considering just that).

And though the fee is charged to businesses large and small that have merchant credit card accounts, it is a consumer issue, too because it drives down your purchasing power. It is an artificial form of inflation, where the premium above regular prices goes into the pockets of bank shareholders and toward their next free airline ride. Interchange fees are reflected in the price of nearly everything you buy. As much as $2 of every $100 you spend goes to card issuers -- no wonder interchange has risen a staggering 117% since 2001. Moreover, bringing this fee back to what it was all about in the first place would give smaller merchants more pricing flexibility -- another way to compete for your business, and maybe save you a bit of money. The current system costs the average American family more than $300 a year in interchange fees.

This might also be a good way to reinforce his opposition to the bankruptcy bill, and keep up the fight for working Americans. He has been a good advocate against the 2005 bankruptcy bill, but not everyone has forgotten his voting for a bad one in 2000 that Bill Clinton had to veto. I noticed the Dodd campaign is pushing a quote from Paul Wellstone in 2001, who said the bill "punishes the vulnerable and it rewards the big banks and credit card companies for their poor practices ... We are heading into hard economic times and we're going to make it hard for people to rebuild their lives."

Small business owners might be where Edwards can make up the most support over the next few months I think we can all agree we need bankruptcy reform, and credit card reform. And I know when it comes to merchants, I know how the rising interchange fee is hurting them. If Edwards wants to make some inroads with a group that might be skeptical of him, I can think of no better way than by bringing them into his fight against the credit card industry.

[Source, via MyBB.com - link: http://www.mydd.com/story/2007/9/7/144828/2751

"The Economic Law of GREED" (Commentary: WayTooHigh.com)

With gas prices again surging to record highs - a barrel today is costing more than $77.00 - it seems that even ExxonMobil, Shell and others are somehow able to lower the cost at the pumps.

But, look at the huge merchant interchange fee windfalls and exaggerated profiteering as motorists, truckers and others fill-up at the pumps and are forced to use plastic to charge. While the interchange fees maintain their steep rates, gas prices have actually declined. So, how is it that with gas prices at record highs, the price at the pump (in So. Calif) is about $2.75 for regular?

When a barrel was hovering at about $70.00, the pump price was about $3.25 and more. The Question is: what is artificially keeping gas prices down, and why aren't the credit card associations and member banks also helping to lower their fees too? The Answer, in our opinion: A classic case of illegal price-fixing.

What happened to MasterCard's® plan to cap interchange fees at the pumps to $50.00, and why has Visa® been silent on this issue, and if they agree to putting an interchange fee cap at the pumps, why not on all transactions too?

Interesting Question: Why Only Cap Interchange Fees At The Pumps? (WayTooHigh.com)

[Commentary: WayTooHigh.com]

Will Interchange Fees Increase to Bail Out the Banks? (Commentary:WayTooHigh.com)

Part II

With the growing turmoil in the financial markets, due to unchecked risky loan schemes, we worry that the banks might use their market power to raise interchange fees. Is this possible? Because of the 80% monopolistic anti-competitive grasp that the credit card associations' member banks wield, we would not be surprised.

Angered, yes.

Surprised, no.

Just today, it was reported that Countrywide's stock price plunged below the $18 price that Bank of America may plan to use as the bench mark for its announced $2 billion investment in the largest mortgage lender in the U.S. With all the attention to the damage caused by loans to people earning $40,000 a year, but "qualifying" for $800,000 homes, the banks will be forced to do something. They will refill their swimming pools of cash if the Visa® IPO moves forward, but even that is questionable, especially as they prepare to identify the risk factors to their planned IPO in early 2008.

According to Reuters, the Mortgage Bankers Association announced that "the rate of home loans in foreclosure rose to a record high in the second quarter of 2007 as more homeowners in California, Florida and other states could not refinance their adjustable-rate mortgages."

PART I

Will Merchant Interchange Fee Cash Cow Be Used To Bail Out The Banks? [WayTooHigh.com commentary]

[Commentary: WayTooHigh.com]

Why Is The Interchange Fee Scheme Inflationary? (Commentary, WayTooHigh.com)

Even gas prices are declining.

The Federal Reserve and the Executive Office are stepping in to help lower interest rates to protect risky real estate investments, where people effectively rented their homes and gained huge tax incentives to borrow against phony valuations.

Seemingly most fees and rates are being lowered, except the bank controlled $40 billion dollar annual fiefdom they created which is now used to extract a hidden tax from merchants and consumers. If only they agreed to our recommendation to post the exact interchange fee on every debit and credit card receipt to transparently present how their scheme works.

We regularly point out that technology and efficiencies are helping to lower rates for products and services, but as far as MasterCard®, Visa® and its member banks, they seem to have missed that lesson on Moore's Law. Even our photo scanning business is garnering nationwide attention for helping to lower the cost to preserve generations of analog pictures.

[Commentary: WayTooHigh.com]

TheStreet.com Comments on MasterCard (click here to view)

"Americans for Consumer Education and Competition At It Again" (WayTooHigh.com)

Americans for Consumer Education and Competition describes itself as "a consumer education group that has the financial support of Visa USA[®]." That said, the credibility factor of their recent statement raises more questions. ACEC's PRNewsire release attacks the world-class Target Corporation, but fails to mention that this advocacy group is partly the voice of Visa, even though they are now seeking contributions, which signals their recognition that they need to be an independent voice, separate from the member bank's Visa USA. If Target Corp. wasn't forced to accept Visa cards, this attack, as reported by Milwaukee's NBC-TV affiliate TMJ-4, should have caused the giant retail chain to consider dropping Visa, but the card association's market power and unbridled controls force Target to maintain its dependence on the leading card association.

We have several previous posts over the past more than two-years regarding ACEC.

[Commentary: WayTooHigh.com]

Some Encouraging Seat Changes at Visa Inc.® (commentary: WayTooHigh.com, via AP news item)

Although it will be a small milage change in commuting to his new job, also in San Francisco, according to AP, Byron Pollitt, Gap Inc.'s chief financial officer is transitioning to a new job as Visa Inc's® CFO.

This is big new and something that boasts encouragement that the world's largest credit card association is preparing to shift its strategy and better embrace and work with its merchant customers. Pollitt, as with all retailing and other executives should best understand the unfair merchant interchange fees and how the fees should be cost-based while enbracing comptition.

In his new role as CFO at Visa Inc., which is a defendant in our interchange litigation, Pollitt's financial knowledge from our prospective as a retailer will be helpful in forcing Visa to shift direction. Hopefully, he will also help us demand that their antitrust price-fixing acquisitions be addressed and quickly resolved.

[Commentary, WayTooHigh.com]

Recent News on ScanMyPhotos.com (30 Minute Photos Etc.)

ScanMyPhotos.com in partnership with the US Postal Service.

"Motorists Furious Over $4.50 Gas Near Orlando International Airport" (Local6.com)

We came across this news item about price gouging at the gas pumps at one service station in Orlando, Florida. The comments by its station owner speak volumes about how Visa and MasterCard have successfully turned their electronic payment operation into a giant pinball game, where there are so many varied prices for the same thing. The difference, in this case is that motorists can easily put their car in drive and choose another gas station, but merchants like us are forced to accept whatever prices the card associations and its member banks dream up.

[commentary: WayTooHigh.com]

"High Credit Card Fees on Small Payments Loom Large for Kiosk Deployers" (SelfService.org)

Interesting Question: Why Only Cap Interchange Fees At The Pumps? (WayTooHigh.com)

We received a call today from a news reporter from a national publication and was explaining the previously discussed $50.00 interchange fee cap at the pumps that MasterCard® had proposed some time ago. The reporter asked us why the level of $50.00 was limited just to service stations and not to all merchants? Good question, especially because by advocating the fee limit, the card association is, in our opinion, effectively explaining that even with credit card transactions, there is no reason to extend the interchange fee beyond that rate.

According to a P-I News Service article, this time last year, MasterCard's logic about limiting interchange fees at service stations must be applied to all merchants. Whether it is Tiffany & Co, Cartier, or the local corner grocery store, the interchange fee should be limited to $50.00; we suggest it should be cost-based, and therefore closer to zero - just as it is in Canada when consumers use their PIN-based debit cards.

The article explained that "MasterCard Worldwide said ... that it will establish a cap on the fees gas stations pay to clear consumer credit cards ... 'We have heard the merchant concerns loud and clear,' Joshua Peirez, group executive of MasterCard's global public policy, said in the statement. [On the retail gas cap], Peirez said it would apply to consumer credit and debit cards and will provide benefits to gasoline retailers on credit card transactions of about $50.00 or more ... MasterCard added that the 'unique structure' of the petroleum distribution business means that gasoline retailers have been 'disproportionately affected' by rapidly rising oil prices."

Click here to read the entire unedited article.

Another profile on this issue was covered by Digital Transactions: "MasterCard Will Post Interchange Rates, Cap Fees for Gas Retailers."

Notice that only MasterCard had come up with the $50.00 cap at the pumps, and we are unsure why Visa® has been silent on this matter? Perhaps because merchants will do the math and demand that all transactions for Visa too - from watches to a bag of groceries - should also have the same $50.00 limitation - until we win the antitrust, price-fixing battle.

[commentary: WayTooHigh.com]

"End of Card Charge Plan Good News" (Retail News)

"Wells Fargo Recoups Following Massive Online, ATM Glitch" (ETC News Network)

WayTooHigh.com hopes they don't use this as an excuse to raise interchange fees to fund the infrastructure to fix this problem.

"Wachovia Eliminates 'Foreign' ATM Fees" (SF Business Times)

"Gas Station Owners Allege Price-Fixing" (via AP)

Gas station owners allege price fixing by Shell, Chevron

"Two Major Airlines Admit to Price Fixing" (via AP)

An Extraodinarily Fictional Read: MasterCard® Explains the Value of Interchange Fees (Commentary: WayTooHigh.com)

According to a posting on the MasterCard® Newsroom pages, the second largest credit card association writes (what we assert is) extraordinary fiction.

Click here to read it in their own words.

This is MasterCard's attempt to justify the annual $40 billion fee that merchants and consumers are forced to pay; many are unaware of this hidden tax.

While MasterCard explains that "a number of merchants and merchant trade groups have filed several lawsuits alleging that the U.S. interchange fees that MasterCard establishes violate antitrust laws, and that the cost of interchange is too high," the litigation is a class-action which represents all merchants - not just a few.

The litigation was brought on behalf of us (30 Minute Photos Etc.), as lead plaintiff, and other businesses and trade associations across the country, not by lawyers. Rather than address the damages, the card association's published points accuses lawyers for seeking these cases to enrich themselves, rather than discussing the billions-of-dollars that benefit the member banks.

In the case of ScanMyPhotos.com (a division of 30 Minute Photos Etc.) we agree with MasterCard that "every business establishes a price for the goods and services it provides." in our case, we created an entirely new business model around digitally preserving generations of analog pictures; we designed a technology and operation that also provides ultra low fees. We are not a cartel that artificially fixes prices, in fact, we regularly share our story with the entire photo imaging industry and regularly speak at trade shows like the Photo Marketing Association and even at last January's (CES) Consumer Electronics Show convention - our rates and how it case about are a secret to nobody.

In our opinion, the biggest misuse of words is MasterCard's explanation that the interchange fee benefits to merchants is that it is a "small fee." Forty-billion dollars each year is anything but a small fee. MasterCard does not fully address the history of these fees and fails to explain that it was created to be cost-based - to cover the manual credit card imprint costs and weighty processing charges incurred when merchants had to mail the paper receipts to have it processed. Today, it is mostly electronic, lightening-fast; and even faster than our super-speedy photo scanning business.

They even use the word "incredible" ["Accepting payment cards provides merchants with an incredible value at a fair price.]" They are right, it is incredible, as in so implausible as to elicit disbelief.

The reality is that with a nearly 80% market dominance, MasterCard and Visa® (which until recently were both owned and controlled [Visa is preparing to launch an IPO] by its member banks) are a monopoly. They control the market. Merchants, like us, are unable to choose not to accept their debit and credit cards - we would be out of business - especially companies like us with a dominant ecommerce revenue stream.

As for interchange fees, it certainly does "help foster... security" but not so much for consumers, as explained by MasterCard, but for the member banks, which look forward to this extraordinarily large cash-cow and unbridled revenue stream; it's a tax few know about, but generates non-stop riches for MasterCard, Visa and its member banks. If they were so concerned about fraud costs, they would cease the issuance of billions of direct mail solicitations and providing credit cards to risky consumers. Today's technology is also helping to lower other types of fraud costs, yet interchange fee adjustments do not reflect the cost savings either.

The fees do encourage "banks to innovate and develop new payment options," but in some cases, to the detriment of cardholders and merchants. Look at the one-hundred plus separate merchant interchange fees which create new revenue streams every time a new innovative scheme is hatched to plunder more money from retailers and cardholders.

When reading the MasterCard explanations, they even discuss how the payment industry is "competitive." As we see it, the only contest they host is one-way, and the competition is to seek out new ways to increase interchange fees. With an 80% market share, competition is a fleeting dream. Why are rates about 1.7% for an average transaction in the U.S., but only .7% in the U.K, .55% in Australia, and 0.0% for PIN-based cards in Canada?

And, according to MasterCard, they do "recognize that merchants do want lower costs for all aspects of their business." It is encouraging that they recognize this fact, but if they strive to help lower interchange costs, why then are fees regularly rising?

Words and actions are very different when it comes to interchange issues and our WayTooHigh.com Credit Card Interchange Report boasts 720 postings since February, 2005. WQayTooHigh.com provides our prospective as a long-time retail and ecommerce business.

[commentary: WayTooHigh.com]

Will Merchant Interchange Fee Cash Cow Be Used To Bail Out The Banks? [WayTooHigh.com commentary]

UPDATE: According to the WSJ, Bank of America Corp. is providing an equity investment to buy $2 billion of Countrywide Financial Corp.

The top four banks (which are also represented as defendants in our antitrust price-fixing merchant interchange litigation) announced today they are borrowing $2 billion directly from the Fed, which can be seen as a sign of liquidity problems.

We cannot help but wonder whether the banks will wield their unbridled power to tap their $40 billion annual merchant interchange fee windfall treasure to help reduce their growing credit crisis. With the deepening mortgage meltdown, will the banks again storm their interchange cash cow vault?

The credit card companies have been regularly hiking their interchange fees. But, with many financial institutions facing a credit shortage and onerous liquidity shortfalls, interchange fees might be one way to bail themselves out at the expense of their retail and cardholder customers. We certainly will not tolerate such a move and are closely monitoring our mail to see whether interchange fees are poised to again rise.

[Source: WayTooHigh.com]

Are Vegas Hotels Trying to Replicate Visa® and MasterCard's® Unbridled Interchange Fee Model? (WayTooHigh.com)

One of the more brazen moves in Ticket Master-like "convenience fee" excesses, is what is happening at several Las Vegas and other hotel properties. It seems that they are trying to replicate the excesses of Visa® and MasterCard's® interchange fee windfalls.

Within the last few month, we have noticed that there is a new charge appearing on hotel bills. It is called a resort fee. During one recent stay at The Hotel, there was no "resort fee," but just this week, it was added to a friend's bill.

During a stay at another property two weeks ago, the Green Valley Ranch tried tacking on their resort fee to the bill. They explained it was to cover the coffee in the room and other amenities; I thought that was what the hotel room charge was for? They acquiesced and we split the difference.

Click here to learn about Hilton's involvement and how it handled their resort fees.

The new resort fees are excessive profiteering and an unfair tax on guests who are going to grow more weary because these fees are about $30 extra per day. These resort or facilities fees are in addition to a regular room rate; much like the merchant interchange fees are really nothing more than a "convenience" or "facility fee."

Both are extra taxes because the companies can get away with it.

In the case of the two leading credit card associations, we guess the actual cost to transact one electronic card payment is pennies, yet they are forcing merchants and consumers to pay upwards of 2, 3, 4 and even 5% of their total purchase in excessive and unbridled greed payments.

In the case of hotels, the resort fee covers items that guests may never use, or that was once included. Years ago, when retailers like us were still using manual credit card imprinters and thick, multi-page carbon-copy card receipts that had to be processed and mailed away to clear, there were real interchange costs; today, it's any one's guess how insignificant the actual costs of processing payments are. Excuses for these fees range from covering fraud costs to paying for cardholders free airline mileages.

Just as the hotels are trying to pass along the cost of using the guy, Visa and MasterCard are successfully forcing retailers to pay more than one-hundred separate rates, including extra charges when cardholders present an affinity or frequent flyer card.

The difference between the new resort fees and the $40 billion interchange tax is that the latter is not negotiable and you can choose not to stay at a certain hotel.

Interchange fees are set by the banks in what we assert are forced on merchants through anti competitive and illegal price fixing schemes. At a Las Vegas hotel you can insist that their newest revenue center be removed from your bill, but retailers and consumers are still forced to pay whatever the banks dream up. We cannot choose another electronic payment service as Visa and MasterCard own an 80% market power over the entire industry.

[Commentary: WayTooHigh.com]

"VISA Is Mocking You, George Washington" (Opinion: Blogcritics.org)

"Rewarding? Banks Like Signature Cards, But Others Cite 'Hidden Costs' (via The Winston-Salem Journal)

[The below article is one of the best profiles we have recently encountered on the disconnect over hidden merchant interchange fees]

By Richard Craver
JOURNAL REPORTER

Financial institutions and merchants are engaged in a marketing tug-of-war over check-card transactions, with consumers’ signatures the focus of the fight.

At least six banks and one credit union serving the Triad are offering rewards, such as airline and hotel discounts, brand-name merchandise and gift cards, to encourage consumers to select credit for check-card purchases.

Signing for a check-card purchase, instead of using a personal identification number, or PIN, converts it into a credit transaction. However, the money still comes out of a checking account.

“The idea of earning rewards points, on everyday purchases that members are already making, seemed appealing to our members,” said Rick Jennings, a senior manager of support services for Allegacy Federal Credit Union. The other financial institutions are Bank of America Corp., BB&T Corp., First Citizens Bank, RBC Centura, SunTrust Banks Inc. and Wachovia Corp.

“Just as you have seen the availability of credit-card rewards programs increase, a similar trend appears to be developing with check cards and debit cards, particularly as the cards continue to grow in popularity as a payment method and institutions respond to competition,” said Nathan Batts, an associate counsel for the N.C. Bankers Association.

However, several retail trade groups are discouraging consumers from signing for check-card purchases. Although the groups said that those transactions are being marketed as a no-cost frill for consumers, they stress they carry “hidden costs” that lead to higher prices at retail and the gas pump.

A battle over fees

The retail groups, including the Food Marketing Institute, National Retail Federation and National Association of Convenience Stores, have created Web sites, such as www.unfaircreditcardfees.com, to counter the financial institutions’ marketing.

“We believe this marketing come-on is driving up the cost at retail for most consumers while rewarding a limited number of consumers,” said Craig Shearman, a public-relations official for the National Retail Federation.

Why all the fuss?

Merchants pay interchange fees to Visa and MasterCard for the handling of credit transactions, whether credit card or a signature check card. Another, less-expensive collection method is typically used for debit-card transactions that require a PIN number. The bulk of interchange fees associated with credit transactions go to financial institutions, according to analysts.

Nationally, 36 percent of banks now offer check-card reward programs, according to a report by the American Bankers Association. Most programs require a signature transaction, but Bank of America offers reward points on a sliding scale for signature and debit check-card transactions.

“All Bank of America check-card rewards programs allow the customer to choose the type of purchase that is most convenient for them,” said Diane Wagner, a spokeswoman for the bank.

On average, there is a 2 percent interchange-fee charge for credit-card transactions, between 1 percent and 1.25 percent for signature check cards, and between 0.3 percent and 1 percent for debit check cards. The higher the transaction amount, the higher the interchange fee.

For example for a $60 purchase, the average interchange fee is $1.20 as a credit-card transaction, 60 cents to 85 cents as a signature check card, and 20 cents to 60 cents as debit.

“Choosing the credit key earns interchange income from Visa USA for Allegacy, which is given back to you in the form of higher savings rates, low or no fees and lower loan rates,” according to Allegacy’s marketing pitch for its check-card rewards program.

The difference in fees works out to be substantial, considering that there have been at least three times more signature check-card transactions as debit in recent years, according to a report from the Chicago Federal Reserve Board. There also are four times as many merchants that accept signature check-card transactions (6 million) as PIN transactions (1.5 million), according to financial institutions and retail trade groups.

According to the Merchants Payment Coalition, credit-card companies and financial institutions collected more than $36 billion in interchange fees in 2006 - up 117 percent from 2001.

“Unlike other credit-card fees that show up on your monthly statement, the credit-card interchange fee is hidden,” the coalition said. “Credit-card company rules make it practically impossible for merchants to tell customers how much they are really paying.”

The check-card rewards include “memorable” experiences, such as being an honorary crew member for a day for a NASCAR team (Bank of America), a lunch train ride for two through Napa Valley wine country (Wachovia) or zero-gravity airplane flight (SunTrust). First Citizens is holding a weekly reward-points sweepstakes through Sept. 29 for customers who sign for their check-card purchases.

A signature check-card transaction has value beyond reward points, the financial institutions said, such as increased identity-theft protection and better merchant identification than a debit transaction.

The check-card reward programs are not really a sign of how competitive the market is becoming for deposits, said Tony Plath, a finance professor at UNC Charlotte.

“It’s more a sign of the growing importance of fee income to the banking industry in a market where the (interest) yield curve has been darn near flat for most of the last two years,” Plath said.

The programs differ considerably in the amount of money required to earn rewards points.

Some Bank of America, BB&T and Wachovia check-card products offer a point for every dollar spent, while Allegacy’s ratio is a point for every $2 spent, SunTrust’s is a point for every $4 spent, and RBC Centura’s is a point for every $5 spent. Allegacy is running a promotion offering double reward points.

The merchant groups also criticize the amount of points required to earn a sizable reward.

For example, it takes 85,000 points to earn Wachovia’s lunch train ride for two through the Napa Valley wine country or 473,700 points for the zero-gravity airplane flight offered by SunTrust. But some $10 restaurant and retail gift cards require just 1,500 points for redemption, and SunTrust offers a cash credit to checking accounts with as few at 3,500 points.

There’s clearly a trend where checks and cash are being replaced, said Scott Qualls, the manager of BB&T’s deposit-access products. “As those are replaced, that reduces the merchant fees for cash and reduced their losses from checks, and drives down their overall cost of payment,” he said.

But Mallory Duncan, the general counsel for the National Retail Federation, said that signature check-card transactions are part of financial institutions’ strategy for “getting more consumers into the habit of choosing credit with their check-card purchases and signing for all purchases.”
“As more consumers sign for check-card transactions, it becomes easier for the credit-card companies to raise their interchange fees,” Duncan said.

About 4.2 cents of every gallon of gas sold nationally in 2006 went toward paying for credit-card transaction fees, said Jeff Lenard, a spokesman for the National Association of Convenience Stores.

“Every consumer pays this amount regardless of how they pay for their gas,” Lenard said. “Essentially, cash customers are subsidizing check-card reward programs through higher pump prices.”

The average grocer makes a profit of about 1 percent on sales, Steven Smith, the chairman of the Food Marketing Institute, said during a July 19 appearance before a U.S. House judiciary committee.

With credit-card interchange fees being 2 percent or more of a sale, “the effect is that fees set collectively by the credit-card companies are now double the industry’s profit margins,” Smith said.

“Basically, it comes down to a decision to either swallow hard and pay high fees that are set with no competitive influences, or turn your back on the 65 percent of your revenue from customers who have been influenced by the card industry’s advertising to believe they are social outcasts if they pay with actual cash,” Smith said.

U.S. Rep. Mel Watt, D-12th, said he expects that there will more hearings on interchange fees to “get a better feel of how the interchange fee system works and who is paying for it.”

Interchange fees have drawn the attention of Consumer Reports, said Matt Fields, the communications counsel for the magazine. “I think it’s fair to say that it will be a large part of Consumer Reports’ study on the ‘dark secrets of debit cards’ due later in August,” Fields said.

Most local community banks said they are considering offering similar programs.

“While some institutions tie in to just a check card and/or credit card, our product will reward them for all accounts they have with us and usage within all accounts,” said Daniel Duggan, a vice president of marketing for Yadkin Valley Financial Corp.

Duggan said that Yadkin Valley is aware of the tension caused by the interchange fees. “We hope customers will use it as a debit when and where they can to help minimize the fee exposure to the business,” Duggan said.

------------

Signature vs. PIN transactions

• One-third of financial institutions offer check-card reward programs, primarily large banks.

• Thirteen percent of consumers are enrolled in a check-card rewards program, up from 8 percent in 2003.

• Of financial institutions with check-card rewards, 71 percent offer the rewards for signature transactions only.

• Fifteen percent of check-card holders have accounts subject to a fee for each PIN transaction, while just 1 percent have accounts subject to a fee for each signature transaction.

• Forty-six percent of check-card holders plan to use signature transactions more often because of a reward program; 16 percent plan to use PIN transactions more often because of a reward program.

Source: Federal Reserve Board of Chicago; American Bankers Association

[Source: Winston-Salem Journal]

News Profile on ScanMyPhotos.com (WayTooHigh.com)

Thursday's New York Times has a feature profile on our business model and mentions ScanMyPhotos.com for our super-fast photo scanning. See link to view. Rhetorical question is why are entrepreneurs able to use technology to cut their prices, while seemingly the credit card issuers continue to increase their fees?

[Source, WayTooHigh.com, via The NYT]

"MasterCard Execs Plan to Sell Shares" (via AP)

Global Merchant Interchange Rates (WayTooHigh.com)

[Click on below map to view]

Write a check and the interchange charge is zero. Use a PIN-based debit card in Canada and the interchange charge is zero. But, use a credit card in the U.S. and the fees are among the highest in the world. Why?

[Source: WayTooHigh.com]

"MasterCard Says EU Ruling on Interchange Fees Will be Made in the Autumn" (ABCMoney.co.uk)

"Pilot: No More Visa, Mastercard at the Pumps" (Land Line)

"National Restaurant Association Applauds House Panel for Review of Unfair Credit Card Interchange Fees" (NRA release)

(Washington, DC) – The National Restaurant Association today applauded the House Judiciary Committee Antitrust Task Force for holding a hearing to review the interchange fee pricing practices of credit card companies.

"Today's hearing presents an important opportunity for further investigation into an issue that poses an enormous burden to small businesses, including restaurants, across the country," said Mike Shutley, Director of Legislative Affairs for the National Restaurant Association. "We are pleased that Congress is shedding light on this unfair credit card process, and are confident it will lead to making the system more competitive and transparent so that it better serves consumers and merchants alike."

The credit card interchange fee is a percentage of each transaction that Visa and MasterCard 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 card, size of merchant, and other factors, but averages close to two percent, or about $2 for a $100 purchase. Visa and MasterCard banks collected more than $36 billion in interchange fees last year, up 17 percent from 2005 and 117 percent since 2001.

According to a recent study, the credit card companies and their banks spend only about 13 percent of the interchange fee on actual. The rest goes for marketing, profit and other things like rewards programs.

Unlike other credit card fees that show up on monthly statements, the credit card interchange fee is hidden, and Visa/MasterCard rules make it practically impossible for merchants to tell customers how much they are really paying. Instead, merchants are effectively left to include the fee in the price of merchandise.

The National Restaurant Association is a member of the Merchants Payment Coalition (MPC), a group of nearly 30 associations representing retailers, supermarkets, drug stores, convenience stores, fuel stations, on-line merchants and other businesses that accept debit and credit cards are fighting for a more competitive and transparent card system that works better for consumers and merchants alike. The coalition’s member associations collectively represent 2.7 million stores with approximately 50 million employees. www.unfaircreditcardfees.com

[source: NRA News Release, Restaurant.org]

"NACS Calls the Rapid Increase in Card Fees “Unjustifiable and Unsustainable” (Supermarket & Retailer)

Noting that the convenience and petroleum retailing industry in 2006 paid more in credit card fees that it earned in overall profits, NACS President and CEO Hank Armour told the House Judiciary Committee’s Antitrust Task Force in written testimony that the “rapid increase in fees is unjustifiable and unsustainable.”

Armour was among those who submitted written testimony before the House Judiciary Committee’s Antitrust Task Force for the July 19 “Hearing on Credit Card Interchange Fees.” Scheduled to testify at the hearing on behalf of the retail community were Mallory Duncan, senior vice president and general counsel of the National Retail Federation and president of the Merchants Payments Coalition, and Steven Smith, president and CEO of K-VA-T Food Stores.

“The [convenience and petroleum retailing] industry posted $4.8 billion in profits last year – which includes profits both at the pump and inside the store – but paid $6.6 billion in credit and debit card fees on its transactions,” noted Armour. “The next time you stop for a fill-up, keep in mind that more of the money you are paying goes to the card companies than the retailer selling you gasoline will get to keep.”

Armour said that Visa, MasterCard and their member banks engage in activities that violate the anti-trust laws of the United States. “The collective setting of interchange fees represents an ongoing antitrust violation by the two leading payment card associations, Visa and MasterCard. These antitrust violations cost merchants and their customers tens of billions of dollars annually.”

The current interchange rates are not justified by costs, noted Armour. “While there may have been some reasonable basis for the size of these fees decades ago, the proliferation of card transactions has driven down per transaction costs. In fact, a bank consulting firm reported last year that the cost of processing transactions was only 13 percent of the interchange fees charged.”

In 2006, the card fees paid by the convenience and petroleum retailing industry increased 22 percent and represented the second largest operating expense in the industry, behind only labor. Overall, Visa and MasterCard have increased their revenues generated from interchange fees by 117 percent since 2001 for a total of $36 billion annually. Armour pointed out that about 60 percent of all interchange in the world is paid by American consumers.

“The United States enjoys the highest volume of credit card transactions in the world. Theoretically, this should lead to significant economies of scale and lower interchange rates. We also have the best technology for processing these transactions and we have very low, and decreasing, rates of fraud. Yet, somehow, U.S. rates are higher than corresponding rates in other countries.”

Armour argued that the reason Visa and MasterCard are able to charge such elevated rates for interchange is because they have market power, which they protect through a complex web of secret rules

[source: Supermarket & Retailer]

"House Studies Credit Card Fees" (ConsumerAffairs.com)

"U.S. Lawmaker Wants Proof Credit Card Fees Don't Harm" (Reuters)

According to the Reuter's story, Visa USA® Vice President Rosetta Jones said in a statement the interchange debate is about business decisions and not about antitrust issues. Ms. Jones is in our opinion, unequivocally wrong. As a retailer, I would be out of business is we were not forced to accept the two lead card association's products. To prove just how wrong Ms. Jones is, we eagerly away Visa's IPO filing and pages of Risk Factors, which we are eager to profile on WayTooHigh.com. If you thought that last year's MasterCard® Risk Factors were worrisome, just wait.

---------------------------------

[Repost from Friday, June 22, 2007]

"Visa Reveals Plan to Restructure for IPO" (via AP)

If you thought that the "Risk Factors" that MasterCard® described during its IPO filing was frightening, just wait for Vias's® list of reasons to get worried too. As reported today by AP, "The offering will also help insulate member banks from billions of dollars in potential legal damages from antitrust claims brought by merchants". Just as with MasterCard, Visa too can try to pawn off its legal liabilities onto others, but its prior alleged antitrust violations and legal obligations do not evaporate by selling shares to the public. Reuters is reporting that "the filing shows that Visa USA members will assume responsibility for a variety of litigation, including antitrust lawsuits in which merchants are accusing Visa and MasterCard of price-fixing.... Visa intends the IPO to fund expansion and help pay potentially heavy legal bills.

"These prior WayTooHigh.com postings help explain why, in our opinion, the transferring of ownership does nothing to dissolve their prior damages.

But, the Alleged Crimes Have Already Been Committed (WayTooHigh.com)

Visa's® Planned Restructuring Sounds Like Musical Chairs (commentary: WayTooHigh.com)

MasterCard's® Legal Bill Could Be $26 Bln (from report in CardLine)

Largest Planned IPO Since Google has No Safety Net (WayTooHigh.com)

MasterCard Inc®. IPO, "The Ultimate Hedge Against Litigation" (WayTooHigh.com)

Will "Risk Factors" Doom MasterCard's® IPO? (WayTooHigh.com)

"MasterCard's® Legal and Regulatory Risks Threaten ... Its Entire Business Model" (BW)

Banks Set to Bolt From MasterCard Inc.® on May 22 (WayTooHigh.com)
[source: WayTooHigh.com, with link to AP]


[Commentary, WayTooHigh.com, via Reuter's article]

US House Judiciary Committee Antitrust Task Force Hearing Comments (

Click on each of the below witness names to view their provided testimony.

Mallory Duncan Senior Vice President and General Counsel National Retail Federation

Steve Smith President and Chief Executive Officer K-VA-T Food Stores, Inc.

Edward Mierzwinski Consumer Program Director U.S. PIRG

Tim Muris Of Counsel O’Melveny & Meyers

John Buhrmaster President First National Bank of Scotia, New York

[source: U.S. House of Representatives Committee on the Judiciary website]

"Merchants Call Interchange Fee Practices Violation of Antitrust Laws " (MPC)

WASHINGTON, July 19 /PRNewswire-USNewswire/ -- In testimony prepared for delivery today at a hearing of the House Judiciary Committee's Antitrust Task Force, Mallory Duncan, Senior Vice President and General Counsel of the National Retail Federation and Chairman of the Merchants Payments Coalition (MPC), called the collective setting of interchange fees by Visa and MasterCard a violation of federal antitrust laws that costs merchants and their customers more than $36 billion every year.

"The collective setting of interchange fees by Visa and MasterCard represents an on-going antitrust violations and it costs merchants and their customers tens of billions of dollars annually," Duncan said. "These fees are in addition to the late fees, over-the-limit fees and other card fees with which consumers are only too familiar."

The credit card interchange fee is a percentage of each transaction that Visa and MasterCard and 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 card, size of merchant, and other factors, but may be up to two percent or more, or about $2 for a $100 purchase. Visa and MasterCard banks collected more than $36 billion in interchange fees last year, up 17 percent from 2005 and 117 percent since 2001.

According to a recent study, the credit card companies and their banks spend only about 13 percent of the interchange fee on actual transaction processing. The rest goes for marketing, profit, and other things like rewards programs. In his testimony, Duncan points out that because so much of the credit card interchange fee is spent on marketing, consumers themselves end up paying for the millions of unwanted and unsolicited credit card offers that flood their mailboxes every year.

Unlike other credit card fees that show up on monthly statements, the credit card interchange fee is hidden. Visa and MasterCard rules make it practically impossible for merchants to tell customers how much they are really paying. Duncan pointed out that since Visa and MasterCard together control at least 80 percent of credit card purchase volume, merchants have no choice but to accept their cards. Because of the anti-competitive behavior of the big card companies and their banks, interchange fees keep going up, acting as what Duncan calls a "hidden sales tax on U.S. commerce, raising both merchant costs and ultimately the price of goods and services sold to consumer."

The MPC, a group of nearly 30 associations representing retailers, supermarkets, drug stores, convenience stores, fuel stations, on-line merchants and other businesses that accept debit and credit cards are 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.

SOURCE Merchants Payments Coalition

"Testimony Today on Interchange Fees" (U.S. PIRG)

"

U.S. House of Representatives Hearing on Interchange

Hearing on Credit Card Interchange Fees is scheduled for tomorrow by the Judiciary Committee Antitrust Task Force. Click here for more info.

Tentative witness list includes: John Buhrmaster President First National Bank of Scotia, New York; Mallory Duncan Senior Vice President and General Counsel National Retail Federation; Edward Mierzwinski Consumer Program Director U.S. PIRG; Tim Muris Of Counsel O’Melveny & Meyers; and, Smith President and Chief Executive Officer K-VA-T Food Stores, Inc.

[source: U.S. House of Representatives Committee on the Judiciary website]

Latest Credit Card Scheme (commentary: WayTooHigh.com)

From the banner add on Yahoo. If you think these official rules to "win" a trip for four to the World Series is lengthy, you really need only read to the third line:PIN-based and international transactions ineligible. "Why is this scheme so unfair to retailers and cardholders? It forces cardholders to demand that their debit card (PIN transaction) be processed at the much higher signature rates, where rather than a flat-fee, a percent of the transaction charge applies. The only home run here is to the banks and credit card association.

[Commentary: WayTooHigh.com]

"House Task Force to Examine Interchange Fees" (CUNA)

"Consumers Picking up Tab for Credit Card Junk Mail" (Merchants Payments Coalition)

WASHINGTON, July 16 /PRNewswire-USNewswire/ -- Did you ever wonder who
pays for all the credit card junk mail that's been burying you lately?

According to new advertisements appearing this week, all Americans do,
thanks to credit card fees that you have probably never even heard of.

The advertisements, placed by the Merchants Payments Coalition, a group
of merchant trade associations seeking a more competitive and transparent
credit card fee system, show how the big credit card companies use some of
the billions they collect from the credit card "interchange" fee to pay for
marketing campaigns, including a mountain of more than nine billion
unsolicited credit card offers that bury our mailboxes every year.

The ads depict a consumer buried in envelopes full of credit card junk
mail, and carry the text: "Ever wonder who pays for all that credit card
junk mail? You do. It comes from your credit card interchange fees.
Interchange is the biggest credit card fee you've never heard of -- and
it's dangerous."

The ads began running in Washington newspapers today in anticipation of
a hearing on interchange fees scheduled to be held Thursday by the House
Judiciary Committee's Antitrust Task Force.

The credit card interchange fee is a percentage of each transaction
that Visa and MasterCard banks collect from retailers every time a credit
or debit card is used to pay for a purchase. The fee varies with type of
card, size of merchant, and other factors, but averages close to two
percent, or about $2 for a $100 purchase. Visa and MasterCard banks
collected more than $36 billion in interchange fees last year, up 17
percent from 2005 and 117 percent since 2001.

According to a recent study, the credit card companies and their banks
spend only about 13 percent of the interchange fee on actual processing.
The rest goes for marketing, profit and other things like rewards programs.
Unlike other credit card fees that show up on monthly statements, the
credit card interchange fee is hidden, and Visa/MasterCard rules make it
practically impossible for merchants to tell customers how much they are
really paying. Instead, merchants are effectively left to include the fee
in the price of merchandise.

The MPC, a group of nearly 30 associations representing retailers,
supermarkets, drug stores, convenience stores, fuel stations, on-line
merchants and other businesses that accept debit and credit cards are
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.

The full ad is available at http://www.unfaircreditcardfees.com

SOURCE Merchants Payments Coalition

"Credit Card Issuers Brace For Fees Cut" (TheAge.com.au)

"He's Out Of Gas" (Kennebec Journal)

"Credit Card Interchange Fees" (Beyond The Consumer)

"Investigating the Payments System" (Mail & Guardian)

"Visa Reveals Plan to Restructure for IPO" (via AP)

If you thought that the "Risk Factors" that MasterCard® described during its IPO filing was frightening, just wait for Vias's® list of reasons to get worried too. As reported today by AP, "The offering will also help insulate member banks from billions of dollars in potential legal damages from antitrust claims brought by merchants".

Just as with MasterCard, Visa too can try to pawn off its legal liabilities onto others, but its prior alleged antitrust violations and legal obligations do not evaporate by selling shares to the public.

Reuters is reporting that "the filing shows that Visa USA members will assume responsibility for a variety of litigation, including antitrust lawsuits in which merchants are accusing Visa and MasterCard of price-fixing.... Visa intends the IPO to fund expansion and help pay potentially heavy legal bills."

These prior WayTooHigh.com postings help explain why, in our opinion, the transferring of ownership does nothing to dissolve their prior damages.

But, the Alleged Crimes Have Already Been Committed (WayTooHigh.com)

Visa's® Planned Restructuring Sounds Like Musical Chairs (commentary: WayTooHigh.com)

MasterCard's® Legal Bill Could Be $26 Bln (from report in CardLine)

Largest Planned IPO Since Google has No Safety Net (WayTooHigh.com)

MasterCard Inc®. IPO, "The Ultimate Hedge Against Litigation" (WayTooHigh.com)

Will "Risk Factors" Doom MasterCard's® IPO? (WayTooHigh.com)

"MasterCard's® Legal and Regulatory Risks Threaten ... Its Entire Business Model" (BW)

Banks Set to Bolt From MasterCard Inc.® on May 22 (WayTooHigh.com)

[source: WayTooHigh.com, with link to AP]

"Internet Sales in 'Dramatic' Slowdown", Reports the NYT's (Commentary: WayTooHigh.com)

According to Sunday's New York Times, reporters Matt Richtel and Bob Tedeschim (June 17) have a high-profile front page story explaining that the decades' "hypergrowth" of ecommerce purchasing has realized a "dramatic" slowdown. The article, however, does not profile highly innovative companies, such as ScanMyPhotos.com, which created an entirely new business model for super-speedy high-speed photo scanning. But, the story does raise questions that if ecommerce business is slowing, what does that mean for the two leading credit card associations? With nearly all ecommerce and online business beholdened to electronic payments, if there is a significant slowdown from other sectors, what impact will that have on companies like Visa® and MasterCard®. If there is a slowdown, will they simply wield their (and its member banks) unbridled market power to raise interchange fees again to counter any adverse effects to its revenue stream?

ScanMyPhotos.com is owned by 30 Minute Photos Etc., the lead plaintiff in the merchant interchange litigation against Visa, MasterCard and its member banks.

[Commentary: WayTooHigh.com, via NYT's article]