Opinion ID: 789039
Heading Depth: 2
Heading Rank: 1

Heading: Visa and MasterCard Transactions

Text: 4 Essentially, every debit or credit card transaction using a Visa or MasterCard product involves five entities: (1) Visa or MasterCard, (2) a card-issuing bank, (3) an acquiring bank, (4) a consumer, and (5) a merchant. At the outset, either Visa or MasterCard, each an association, grants a license to a member bank to issue credit and debit cards with its brand name. A card-issuing member bank then issues a credit or debit card to a cardholder with either the Visa or MasterCard brand name. An acquiring bank, a member of Visa and MasterCard, contracts with a merchant to accept payment through Visa and MasterCard. When a cardholder makes a purchase with either a Visa or MasterCard product, the acquiring institution reimburses the merchant for the cardholder's purchase, less a discount fee. The discount fee is determined by the acquiring institution. The card-issuing bank charges an interchange fee each time it provides funds to the acquiring bank as payment to a merchant for the cardholder's purchase. Visa and MasterCard set the interchange fee that all card-issuing banks charge. Economics demands that the discount fee be greater than the interchange fee the acquiring institution must pay to the card-issuing institution. See Visa Check II, 192 F.R.D. at 72. The following illustrates this network of transactions: 5 Bank A issues a Visa credit card to Consumer X, who purchases a garment for $100 at Store Y, which was acquired for Visa by Bank B. Visa rules mandate that Bank B must pay Bank A an interchange fee of 1.25% of the amount of the transaction, i.e., $1.25. Bank B will charge Store Y a discount fee higher than $1.25 in order to recover the mandated interchange fee and other fees that Visa rules mandate Bank B to pay Visa on each and every Visa credit card (and debit card) transaction and to earn a profit for itself. Thus, Bank B may charge a discount fee of 1.60% of the transaction amount (or $1.60) to Store Y. When Store Y presents Consumer X's $100 Visa transaction to Bank B, the bank will credit Store Y's account for $98.40, send the Visa mandated $1.25 interchange fee to Bank A and retain the $.35 balance of the discount fee. 6 2d Am. Compl. ¶ 8( o ).