The day before Mastercard announced the World Elite product discussed in another thread, they also made other announcements that may have greater long term impact on credit card reward programs. These are reported in the Wall Street Journal on 6 September 2006

http://online.wsj.com/article_print/...045754863.html

Highlights:

1. MasterCard Inc. said it will soon begin posting fees it charges retailers..."Among the things merchants have told us they want is additional transparency around interchange rates," said Walter Macnee...Americas president of MasterCard. I take this to mean that Mastercard will publish a fee schedule to allow merchants to verify that they are paying the same as their direct competitors, but I believe this will also allow them to see that other types of merchants pay less and this will create pressure to lower fees generally.

2. MasterCard Inc. said it ... will cap fees it charges on fuel purchases. I am not sure if this means they will not charge more than a fixed dollar amount per transaction, or if it means they will charge the same for Standard, Gold, Platinum, World and Elite fuel transactions. Either way, once the precedent is set for fuel I expect it will spread to other categories.

3. The average interchange fee on all U.S. purchases is about 1.56%, according to a May 2005 Federal Reserve study. I think tells us that any rewards program that pays more than about 1% cannot be sustained longterm. Note that the HSBC/Saks program offers only 1%, except on purchases from Saks, even though the World Elite cards are intended to extract higher merchant fees.

dennis