December 15, 2010

VISA and MasterCard ripping off consumers

CANADA - VISA and MasterCard are ripping off both businesses and consumers due to “restrictive” and “anti-competitive rules” on merchants that add up to $5 billion CDN / year just in Canada alone, according to a report by Canada’s competition watchdog.

Canada's federal bureau of competition policy has asked the Competition Tribunal to strike down the credit card rules (essentially making them free), which it argues effectively eliminates competition between the two multinational credit card giants. The rules (which are identical for both VISA and MasterCard) is effectively a monopoly on credit card lending and overcharges businesses for the right to accept credit cards in their stores.

The costs to businesses ends up being passed on to consumers, resulting in an approx. 3% hidden 'credit card' tax on all purchases. Canadians used their credit cards for $240 billion worth of purchases in 2009.

Globally VISA and MasterCard handled approx. $6.5 trillion USD in transactions in 2009. Together they represent 90% of the global credit card market.

For businesses who accept these cards, the rules result in an “increased costs to business and ultimately consumers”...
“Visa and MasterCard's anti-competitive behaviour hurts businesses and consumers alike,” said commissioner Melanie Aitken. “It is particularly harmful for small and medium sized businesses, key engines for economic growth in Canada. Without changes to the rules, merchants will continue to face high costs for credit card acceptance, while consumers, even those who use lower-cost methods of payment like debit or cash, will continue to pay higher prices.”
Businesses are in favour of scrapping the unfair fees, pointing to the credit card industry's billions of annual profits.

Politicians looking to cut back on household debt in Canada (Canadians now have more household debt than Americans) need to focus on regulating the credit card and banking industry.

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