Question
As a business owner that accepts credit cards, I just got news of some of the most disturbing stuff I've read in a long time. If *you* pay *me* with an airline mile credit card, *I* will need to pay Visa/MC an extra 0.33% (in my case).
As a merchant, I am absolutely frigging livid about this. This change is being applied to ALL Visa/MC merchants starting April 1.
Even worse, at this moment in time, I cannot choose to NOT accept "Level 2 Rewards cards" (as Visa/MC now term them).
Putting on my miles junkie hat, I expect that we will see more and more merchants apply a surcharge for these kinds of cards once it's technically possible.
As a business, I am completely outraged by the fact that I am subsidising these big banks' marketing and miles costs.
Curious to see what Flyertalkers think...
Answer
Although I feel for you. We are all screwed by Visa/Mastercard, the bank just have more money to through at tham. Although for .33% I would by every mile I could from you. :)
Although some businesses may choose to not accept if given the opportunity, most will just make up for it in price. Remember the Gas prices being different for Cash or Credit? Don't see that anymore.
Answer
As a business owner that accepts credit cards, I just got news of some of the most disturbing stuff I've read in a long time. If *you* pay *me* with an airline mile credit card, *I* will need to pay Visa/MC an extra 0.33% (in my case).
As a merchant, I am absolutely frigging livid about this. This change is being applied to ALL Visa/MC merchants starting April 1.
Even worse, at this moment in time, I cannot choose to NOT accept "Level 2 Rewards cards" (as Visa/MC now term them).
Putting on my miles junkie hat, I expect that we will see more and more merchants apply a surcharge for these kinds of cards once it's technically possible.
As a business, I am completely outraged by the fact that I am subsidising these big banks' marketing and miles costs.
Curious to see what Flyertalkers think...
Correct me if I am wrong here, but don't the credit card companies purchase these miles from the airlines? Surcharging a business for this just seems totally wrong.
Answer
Correct me if I am wrong here, but don't the credit card companies purchase these miles from the airlines? Surcharging a business for this just seems totally wrong.
Yes, it is totally wrong. With the recent bankruptcy legislation, major banks sure are on a roll...
Answer
Correct me if I am wrong here, but don't the credit card companies purchase these miles from the airlines? Surcharging a business for this just seems totally wrong.
Anybody know how much the banks pay per mile?
Answer
As a business owner that accepts credit cards, I just got news of some of the most disturbing stuff I've read in a long time. If *you* pay *me* with an airline mile credit card, *I* will need to pay Visa/MC an extra 0.33% (in my case).
As a merchant, I am absolutely frigging livid about this. This change is being applied to ALL Visa/MC merchants starting April 1.
...
good day,
hmmm... could you please inform us of the source of your news?
after all april 1 is an auspicious date, n'est-ce pas?
Answer
We haven't heard anything like this. Who is your credit card processor? And why would they know or care whether the card issuer is offering miles or some other incentive?
Answer
I got the same notice from my credit card merchant today on the monthly statement. It's not fair that I have to pay a higher percentage for processing miles cards when I'm not offering the miles, but there is nothing I can do--except not take cards, which isn't an option. This whole thing stinks.
Answer
I own my own business and accept VISA, M/C, AMEX and Discover. I haven't heard anything about this from my Merchant Provider.
Anytime there is a change in TOS I am normally given at least a 30 day notice.
April fools joke?
Answer
Despite the "April 1st" thing, looks like it's not a joke...
MASTERCARD WILL RAISE INTERCHANGE RATES APRIL 1
February 11, 2005
MasterCard International is raising interchange rates, effective April 1, in its U.S. region for its consumer credit, World MasterCard, debit, corporate, Maestro and ATM rate programs, according to its Feb. 1 U.S. Region Marketing Bulletin. Signature debit rates won't change in 2005 and 2006, MasterCard reports. A MasterCard spokesperson told CardLine the changes are designed to bring the rates in line with its competitors but declined to answer questions. Under the consumer credit program, the common Merit III Base category will rise from 1.54% of the transaction plus 10 cents to 1.63% of the transaction plus 10 cents. The increase means the fee for a typical $40 transaction will rise from 71.6 cents to 75.2 cents. Interchange for the Merit III Tier 1 category will remain at 1.48% of a transaction plus 10 cents. The World card will have its own program schedule in a shift away from the consumer credit program. The World card is designed for affluent consumers and includes multiple rewards deals. World's interchange falls under 17 category rates, though it will remain part of the Consumer Credit programs on refund and volume-tier qualifying. Interchange in the World standard category will be 2.90% of a transaction plus 10 cents, or $1.26 for a $40 purchase. The common Merit III Tier 1 will charge 1.58% of a transaction plus 10 cents, or 73.2 cents for a $40 purchase. Interchange for corporate programs will rise in five of 10 categories.
[..]
Last fall, Visa USA announced it would modify interchange rates beginning April 1, lowering some rates on its debit check card while raising rates on its Interlink PIN debit network
Answer
I just posted this over in OMNI, as an ISO/MSP I can tell you that this is not a joke, it's actually the "unofficial" annual price increase we get every year from the associations. Axey - I just thought about your increase, it may be that your ISO is spreading out the costs to make is easier to understand, not really "sticking" it to you. There was a different hike based on merchant type, one for general retail and another for "T&E." Here is a portion of the letter that I sent out to my customers last month:
We would like to inform you that the card associations have recently announced changes to their respective interchange, assessment fees and qualification criteria. On the February merchant statements, we will announce these interchange rate increases to all of our merchant customers. These changes will go into effect, April 1, 2005.
Merchant account changes are as follows for Tiered Methods:
• 4 basis point (0.04%) increase for credit card Qualified
• 4 basis point (0.04%) increase for all Mid/Partial Qualified transactions
• 10 basis point (0.10%) increase for all Non-Qualified transactions
• Creation of new Rewards Qualified category for Retail at 15 basis points (0.15%) higher than Qualified rate
• Creation of new Rewards Qualified category for T&E (restaurant, lodging, auto rental) at 40 basis points (0.40%) higher than Qualified rate
• $.05 per transaction increase for all Pin-based debit transactions
Answer
Just to be clear -- everyone who accepts Visa/MC will be affected by this, as Visa/MC will be passing on the costs to your CC processor (ECHO in my case, who also handles the USPS). How your individual processor deals with it is their own deal. ECHO just happens to be very upfront about BS like this.
Answer
Axey - I just thought about your increase, it may be that your ISO is spreading out the costs to make is easier to understand, not really "sticking" it to you.
Actually, it turns out the rep I spoke to was confused about my merchant type. My rewards pass through charge will actually only be 1 basis point higher (in addition to the other increases). The .33 will be for Hotel/Auto Rental/Passenger Transport categories. I'm very very sorry for those people in that category.
No matter how small the charge, this practice is completely frigging outrageous and unacceptable, imho. These banks are completely out of control, as seen by recent news developments.
Answer
This situation has the makings of a class-action suit against Visa/MC. Won't be surprised when I get the announcement; but, unfortunately, in the mean time, it's costing me money.
Answer
This situation has the makings of a class-action suit against Visa/MC. Won't be surprised when I get the announcement; but, unfortunately, in the mean time, it's costing me money.
Well there are already 54 categories based on the same logic as the breakout of the affinity cards, so I don't know if a suit would win. I can see a Wal Mart suit situation where they sued and won forcing the associations to give them the option of forcing offline debit (check cards) to online debit (PIN based) or simply not taking the cards at all.
Answer
I totally feel for the merchant.... If a consumer decides to get a rewards card, that should not make a higher fee for the merchant.
The rewards are being offered by the banks, and they, and only they, should bear this cost.
I am shocked that Visa & Mastercard are allowing this to happen.
Answer
Actually this is not related to reward cards. Rather MC/Visa some years ago decided they needed a product to compete with Amex's "no preset spending limit", and introduced the World Mastercard and Signature Visa respectively. Both cards try to offer features similar to Amex (including "no preset spending limit"), but also charge merchants a higher discount rate. Unlike Amex, merchants cannot chose to accept only certain MC/Visa cards, they either accept all or none. This has been going on for at least 4 years now, though the difference in wholesale rates may have been hidden from smaller merchants by credit card processors (who typically markup the discount rates significantly for small merchants and may offer a single rate based on the type of merchant).
Of course Banks that offer reward MC/Visa cards quickly realized that these cards are more profitable and have been pushing their reward card customers to switch to the World Mastercard or Signature Visa products, often by offering bonus miles for switching, or in some cases additional benefits (eg. 1-2 free companion tickets per year). However, it is not correct to say that the additional fee is related to the rewards, since not all World Mastercard or Signature Visa cards offer miles or rewards. Rather holders of these cards are supposed to be better spenders (like Amex card holders) and hence worth the higher fee (kind of like a customer finder fee).
I am surprised it took this long for the difference in discount rates to be passed on to merchants by processors.
Edited to add: A similar surcharge has been in effect for all corporate/buisness MC/Visa cards for many years as well.
Answer
Anybody know how much the banks pay per mile?
I have heard Citibank pays 0.6 cents/mile for AA miles. Typically reward cards pay the lowest rates to the airlines, with other partners paying between 1.5-2.4 cents/mile
Answer
Actually this is not related to reward cards.
Actually, it is. What you're referring to is an entirely different ball of wax.
This policy is brand new as of April 1.
Answer
But, don't all or most of the airline rewards cards come with an annual fee, so the issuer is already making alot of kwan from all of us, now getting piggy with the merchants as well. I am in the motel catagory, and all my transactions for rooms, ****rs, and gas will now be higher, grrr
JudyJFLA
Answer
April 12, 2005 Wall Street Journal has an article on this topic:
Merchants Balk At Higher Fees For Credit Cards (http://online.wsj.com/article/0,,enterprise,00.html)
By GWENDOLYN BOUNDS and ROBIN SIDEL
Staff Reporters of THE WALL STREET JOURNAL
April 12, 2005
---BELOW ARE SELECT SECTIONS OF THE ARTICLE, REGISTRATION REQUIRED TO READ COMPLETE ARTICLE---
"The letter that arrived in late February at 30 Minute Photos Etc. was so nondescript that co-owner Carl Berman nearly tossed it in the trash. But then he read the fine print that infuriated him: As of April 1, merchants like 30 Minute Photos would pay a higher fee when customers used one of several premium Visa and MasterCard credit cards issued by the country's biggest banks. ..."
"... Fee increases aren't limited to premium cards. The National Retail Federation estimates that the latest round of interchange fees will raise rates anywhere from 2.7% for a basic Visa card transaction to 9% or more for a transaction made with a corporate card from MasterCard. All types of credit cards are included in the fee increases -- premium cards linked to airlines, for instance. Fees on a few cards will actually drop; Visa recently lowered some debit-card interchange fees. ..."
"... Leslie Blesius, owner of the high-end home furnishings store Jolie Maison in Highland Park, Ill., is considering imposing a minimum purchase of $20 for customers who pay by credit. Credit cards, she says, are "becoming very cost-prohibitive for me." As for the higher fees on premium cards, she asks, "Because someone gets something from United Airlines should I be paying a higher fee?" ... "
-----------------------------------------------------------------
There are 23 paragraphs to the entire article.
Answer
here is the full articel using an approved link from my Wall Street Journal account.
http://www.emailthis.clickability.com/et/emailThis?clickMap=viewThis&etMailToID=838402120
Answer
What irks me is the charges for "Non Qualified Charges" Just what are they; overseas cards, or what? All my transactions are swiped, but I get hundreds of transactions a month tagged with this extra few cents each. Anyone have any input on this?
JudyJFLA
Answer
What irks me is the charges for "Non Qualified Charges" Just what are they; overseas cards, or what? All my transactions are swiped, but I get hundreds of transactions a month tagged with this extra few cents each. Anyone have any input on this?
According to my merchant company, nonqualified charges include foreign cards and gift cards. I think there might be one more but can't remember it.
Answer
Business cards are also non-qualified.
The WSJ article is being picked up by some local (http://www.nwanews.com/story.php?paper=adg§ion=Business&storyid=113817) papers (http://www.azcentral.com/business/articles/0417creditfees17.html) today.