WASHINGTON, Dec. 19 /PRNewswire-USNewswire/ -- Today a coalition of U.S. merchants opposed to unfair credit card fees (unfaircreditcardfees.com) welcomed a ruling by the European Union (EU) Competition Commission that MasterCard's credit card interchange fees for consumers must be cut across the 26 member nations of the European community.
Calling the MasterCard credit card interchange fee system illegal and an unfair burden on European consumers and merchants, EU Competition Commissioner Neelie Kroes said "Consumers foot the bill, as they risk paying twice for payment cards: once through annual fees to their banks and a second time through inflated retail prices paid not only by card users but also by customers paying cash."
"The EU commission report underscores that Visa and MasterCard hit consumers coming and going. Cutting credit card interchange fees is an important victory for Europeans as well as for anyone traveling there," said Tim Hammonds, President and CEO of the Food Marketing Institute, a Merchants Payments Coalition (MPC) executive committee member. "But American consumers and merchants pay more than twice as much as Europeans - two dollars out of every $100 directly to Visa and MasterCard issuers. These exorbitant hidden fees are out of proportion to the amount that would be paid in a competitive market," added Hammonds.
The EU competition commission concluded that MasterCard abused its dominant position in the market by setting credit card interchange fee levels too high. In January, Commissioner Kroes referred to Visa Europe and MasterCard as "an effective duopoly" that make "outrageous profits," and that consumers are being "ripped off" by card fees.
"Global recognition that Visa and MasterCard engage in illegal price fixing is a call to action for the Congress in 2008," said Hammonds, referring to moves by Britain and Australia that have dramatically reduced credit card interchange fees in those countries as well in recent years. Credit card interchange fees paid by U.S. consumers and merchants to Visa, MasterCard and their member banks is expected to total more $40 billion dollars this year.
Credit card interchange fees in the United States, ultimately paid by American consumers, are currently more than twice as much on average as they are in Europe -- the same credit card interchange fees just ruled too high by EU Commissioner Kroes. U.S. interchange fees on average are about 2 percent, while Visa Europe rates, for example, are capped at 0.7 percent.
Raising hidden credit card interchange fees is how Visa and MasterCard encourage banks to issue more credit and debit cards - as long as rising rates are kept secret, consumers have no way of knowing the extra costs they are paying. "That's why U.S. interchange rates are among the highest in the developed world," said Hammonds.
In fact, Visa and MasterCard still treat American merchants and consumers the same way they used to treat the Europeans. Here, credit card interchange fees are set in secret and credit card company rules make it practically impossible for merchants to tell customers how much they are really paying.
Interchange rates in the United States are now approximately two percent; in other words, two dollars out of every $100 spent on credit and debit cards goes to the credit card companies and consumers who pay whether they use plastic, checks, or cash. In the United States, interchange fees are the biggest credit card fee you have never heard of, dwarfing all the other credit card fees: late fees, over-the-limit fees, balance transfer fees, annual fees, inactivity fees, penalty interest fees, universal default, and even ATM bank fees.
The MPC is a group of retailers, supermarkets, drug stores, convenience stores, fuel stations, on-line merchants and other businesses who are fighting against unfair credit card fees and 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/
Merchants Payments Coalition
CONTACT: Christy Moran, +1-202-355-6309, cmoran@webermerritt.com, for Merchants Payments Coalition
.gif)
