Merchants Complain About Card Association Interchange Valentines
The Merchants Payments Coalition has announced that it views Visa, MasterCard and their affiliated banks as receiving a "one-day Valentine gift of $169 million this year because of hidden "interchange" fees collected on
transactions during the holiday."
"Visa and MasterCard are plucking a few petals off every rose this Valentine's Day," MPC Chairman Mallory Duncan said. "Whether it's a bouquet of flowers, a box of chocolates or a diamond ring, credit card companies are seeing a windfall because of their secret interchange fees that drive up the price of virtually every product in virtually every store. In an atmosphere of romance, interchange is a love-hate relationship -- Visa and MasterCard love to charge these fees and consumers hate to pay them."Largely unknown to most consumers, interchange is a percentage of each transaction that Visa and MasterCard collect from retailers every time a credit or debit card is used to pay for a purchase. The fee varies with type of merchant, transaction and card, but averages close to 2 percent for most credit card and signature debit transactions. Visa and MasterCard interchange fees totaled $30.7 billion in 2005, up 17 percent from 2004 and 85 percent since 2001. The average family in the U.S. pays more than $300 every year in hidden interchange fees.
Valentine's Day spending is expected to total $16.9 billion this year, according to the National Retail Federation. Credit cards typically account for about half of consumer transactions, so at 2 percent that amounts to $169 million, according to MPC calculations.
Unlike other fees that show up on cardholders' monthly statements, interchange fees are not disclosed to consumers. Visa and MasterCard's non- negotiable contracts effectively require merchants to include the fees in the price of merchandise, forbid them from being shown on cash register receipts and effectively bar cash discounts. A recent MPC poll found that 68 percent of consumers surveyed had never heard of interchange, but 94 percent thought the fees should be disclosed and 91 percent felt Congress should require disclosure from the card companies."
The Merchants Payments Coalition, 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, is fighting for a more competitive and transparent card system that works better for consumers and merchants alike. The coalition's member associations collectively represent about 2.7 million stores with approximately 50 million employees. For further information, please visit http://www.unfaircreditcardfees.com
The comments in this article are incedibly inccurate. Mallory Duncan needs to learn the facts before she's quoted in such a piece:
1. Interchange fees aren't hidden; they are fully disclosed to merchants. If they aren't, the merchant should ask for them from their processors.
2. Visa and MasterCard are in business to make money, just like the merchants. If merchants don't like paying interchange, let them stop accepting Visa and MasterCard and see what happens to their sales.
3.Interchange is mostly unkown to consumers because they don't pay it. Interchange is the fee that the merchants pay for accepting the cards, like any other service. Merchants' profits are unknown to consumers too. I don't recall going into a store and getting something for free. Interchange won't show up on a cardholder's statement - THEY DON'T PAY IT. It will show up on the merchants' statements.
4. The competition is what it is. Again, if Duncan doesn't like interchange, tell her not to accept Bank cards. American Express is even more expensive; Discover is not as widely accepted and checks and cash can actually be more expensive to accept than cards. Better yet, let the MPC start their own card and put the infrastructure, networks, authorization and settlement processes and marketing in place and see how chep they can run it.
5. Visa allows cash discounts.
Finally, in most cases, merchants can decrease their interchange costs by processing the cards correctly, following the acceptance regs and educating themselves instead of whining about the fees. Get with the program and conduct business like an adult instead of blaming others.
Posted by: Paul Kurtz | February 14, 2007 at 06:08 AM
Paul, I have some points to your points.
1. No one said the fees are hidden to merchants; the article clearly states that the fees are hidden to consumers and that in many cases, the merchants are forbidden to inform the consumers of the interchange fees.
2.Exactly- Visa and Mastercard have a duopoly on the card industry and know that few businesses could survive without taking their cards, so they can get away with charging exorbitant fees.
3. Consumers pay for interchange as it gets passed along to them in the form of increased prices for all goods. Just because my statement doesn't include an itemized breakdown of the cost of every good doesn't mean that I didn't pay those costs.
4. Again, see point number 2.
5. Yes, Visa does allow cash discounts, but they make the process all but prohibitive for merchants.
The bottom line is this: if interchange fees are such good policy, why do the card companies go to such great lengths to keep the public in the dark?
Posted by: Hamilton | February 20, 2007 at 04:19 AM