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Petitioner’s cardholders may use their MasterCards to charge
the cost of goods and services purchased from participating
merchants. The merchants submit MasterCard sales receipts to
their merchant bank. The merchant bank processes merchants’
credit card transactions. The merchant bank pays the merchants
the amount of the charges less a merchant discount. The merchant
discount is a set percentage, e.g., 2-1/4 percent, of total
charges. The merchant bank transfers the sales draft through
interchange to an issuing bank such as petitioner. The issuing
bank pays the merchant bank the amount of the sales draft less an
interchange fee (for example, 1-1/2 percent of the sales draft).
The interchange fee is paid by the merchant bank to the issuing
bank. The issuing bank bills the cardholder for the full amount
of the sales draft.
Before 1981, petitioner earned interchange fees from
merchant banks. Petitioner earned merchant discounts when it was
both a merchant bank and an issuing bank.
Before 1981, petitioner had two primary sources of income
from MasterCard cardholders: (a) About 90 percent was from
finance charges paid by cardholders who paid less than their full
balance, and (b) about 10 percent was from interchange fees
described above. Petitioner also received from cardholders over
limit fees (not defined in the record), cash advance fees until
May 1983, and other charges, including late payments and credit
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Last modified: May 25, 2011