Visa And MasterCard Payment Fee Hikes A Bad April Fool's Day Joke, Says Food Marketing Institute

Credit card payment fee increases announced on Friday by Visa and MasterCard were a "bad April Fools' joke for supermarkets and their customers," says Tim Hammonds, president and CEO of the Food Marketing Institute (FMI). He was commenting on a

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Credit card payment fee increases announced on Friday by Visa and MasterCard were a “bad April Fools’ joke for supermarkets and their customers,” says Tim Hammonds, president and CEO of the Food Marketing Institute (FMI).

He was commenting on a 36 percent increase in the interchange fee for supermarket shoppers that use the Visa Signature credit card and a 9 percent increase for shoppers that use any MasterCard credit card.

“Interchange fees already cost consumers and retailers nearly $30 billion a year,” Hammonds said. “Increases of this magnitude are unconscionable – especially when transaction costs are declining and plastic is becoming the predominant form of payment in the U.S. In every other aspect of business, when costs go down, fees go down. The card issuers apparently don’t think the laws of competition apply to them.”

Since 1994, the interchange fees for credit cards have increased five times – from 1 percent of the transaction amount to as much as 1.65 percent plus 10 cents for the Visa Signature credit card. Over that same period, the fees for cards in which consumers enter a personal identification number or PIN have increased from 8 cents to as much as 50 cents per transaction.

Hammonds added, “With this latest increase in the interchange fee for Visa credit card transactions, the share of the grocery shopper’s dollar that goes to the card company and the bank is almost double the amount that goes to the supermarket’s bottom line.” In fiscal year 2003-2004, overall supermarket industry net profits were 0.88 percent, according to FMI data.

“This increase,” he said, “is yet another example of Visa asking retailers and consumers to fund marketing and reward programs that benefit only a few customers, while being subsidized by everyone else. It increases the cost of doing business and the cost of the goods and services paid by all customers.”

The Food Marketing Institute (FMI) represents 2,300 food retailers and wholesalers in the United States and around the world.

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