MasterCard International has announced new procedures for clearing credit card transactions.

To take effect next year, the MasterCard interchange compliance program is intended to reduce costly disputes among issuing banks, merchants, and the merchants' banks.

The program derives its name from the interchange fees that merchant banks pay to card-issuing banks for each transaction. A major objective of the MasterCard program is to assure that the fees are being set appropriately to cover float, processing expenses, and risks of losses.

Like a similar program under way at Visa U.S.A., MasterCard's is intended to reduce chargeback disputes by making sure the information running through the system is accurate. A chargeback occurs when a cardholder refuses to pay for a charged item.

The Visa upgrade has proved difficult for some banks and their transaction-processing vendors, which had to adjust their computer systems to comply.

|Gnashing of Teeth' Expected

Industry leaders believe the Visa program will fulfill its objectives, including the establishment of a network of payment terminals that can handle both debit and credit transactions. "But there will be a great deal of gnashing of teeth to get there," said Paul Martuas, a Tampa, Fla.-based payment systems consultant.

MasterCard said its program will avoid such difficulties.

"The two things that we will require of our members are accurate information in their transaction records and establishment of a process for handling any adjustments," said executive vice president Phil Verdi. "All other systems changes will be made by MasterCard."

MasterCard has estimated that card issuers receive more than $100 million in interchange fees each month.

The per-transaction rate ranges from 1.3% to 1.6% The fees vary from merchant to merchant according to the type of transactions handled.

For example, transactions in which no signature is taken from the cardholder would generally have a higher interchange rate because they entail relatively greater risk.

MasterCard said its new standards will be published in the fall and member will be given time to test themselves for compliance before the program takes effect, probably next spring.

General Electric Co. has said it will cancel the American Express, Visa, and Diners Club cards it had handed out to employees and switch to MasterCard for its business travel and entertainment expenses.

The GE account - involving some 70,000 cards according to industry estimates - represents a major victory in the battle for market share in the corporate card business.

The market represents more than $135 billion a year in sales, and bank cards have been gaining on American Express, which remains the industry leader with more than 5.2 million corporate cards issued.

Everest National Financial, a Utah subsidiary of GE, will issue the corporate cards.

An American Express spokeswoman said the switch was understandable, given that GE itself issues MasterCards through Everest and its Ohio-based Monogram Bank subsidiary. She added that American Express will continue to supply 18,000 corporate cards to GE's aerospace division, which is being sold to Martin Marietta Corp.

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