'A penny times billions adds up'

Trade group (NACS) representing convenience stores and grocers upset with recent credit card fee increase
BY BILL FREEHLING
Date published: 5/29/2009

An association of retailers is upset about a recent fee increase charged to merchants each time a customer uses a credit card to pay.

The National Association of Convenience Stores calls last month's usage-fee increases by Visa and MasterCard "beyond outrageous." The fees, which took effect April 17, increase a merchant's per-charge transaction cost by more than a penny. Merchants are now charged about 2 cents per transaction on usage fees, which are in addition to other costs.

"A penny may not seem like much, but a penny times billions adds up quick," said NACS spokesman Jeff Lenard. "And when business costs go up, they get passed along to consumers, so we are all the losers."

MasterCard spokesman Chris Monteiro declined to comment on the pricing adjustments but noted that "every business establishes a price for the goods and services it provides, and the electronic payments industry is no exception.

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In related news, the NACS also ran an editorial on their website complaining that Interchange Fees need to be regulated or the benefits to the recent Credit Card Bill of Right will be badly affected:

Editorial: Merchants Need Interchange Reform 

Unless interchange fees are regulated, the benefits to consumers of recent credit card reform will be sharply reduced

MINNEAPOLIS, MN – An editorial in the Minneapolis Star-Tribune
welcomed the passage of the Credit Cardholders’ Bill of Rights as one
protecting cardholders, although the bill failed to address interchange
fees.

 The editorial urged Congress or courts to act and
eliminate interchange fees, costs that total $45 billion annually. The
authors, Craig Wildfang and Mark Williams, recommended the following:

• Congress should regulate interchange fees, those charged to
  merchants by card-issuing banks. Collectively, the fees total $45
  billion annually and are rising.
• U.S. interchange fees are among the world’s highest and are
  not supported by commensurately higher costs to banks or card networks.
  In fact, the costs of running computer hardware and software — “the
  principal costs of running a payment card network” — have been
  decreasing.
• Interchange fees are essentially a privately enacted sales
  tax by the country’s largest banks (creators of Visa and MasterCard),
  “except that the revenue goes to the country’s largest banks, not to
  the government.” No controls have been in place to regulate these
  “fixing of prices to merchants” by the banks. Indeed, “the five largest
  card-issuing banks account for 80 percent of all cards.”
• Other countries have contested interchange fees, including
  Australia and the European Union. In those cases, authorities lowered
  or eliminated the fees.
• Canada’s Interac debit network, as well as other foreign debit card networks, voluntarily do not charge interchange fees.

Wildfang and Williams summarized that eliminating the $45
billion interchange fee would provide an immediate stimulus to the
economy. And noting that Citibank and Bank of America have accepted
hundreds of billions of dollars of taxpayer funds to endure the current
financial crisis, a reciprocal gesture is especially merited. Without
doing so, the benefits of the Cardholders’ Bill of Rights are sharply
reduced. And if Congress fails to act, merchants will turn to the
courts to seek relief.