The U.S. Postal Service has decided that accepting plastic is too expensive when it comes to bulk mailings.
The Postal Service will no longer take credit card payments for bulk mailing and meter settings, but it will continue to honor plastic for retail transactions.
"In recent months, we started to see some of our major companies with extended credit lines putting multimillion-dollar transactions on credit cards,"said Richard H. Curran, project manager for electronic payments, the United States Postal Service. "That wasn't cost-effective for us."
The Postal Service reported that a single corporate customer charged $30 million in a month. Another charged $6 million over the course of three months. Some sources said customers might have paid with credit cards to take advantage of rebates.
More commonly, they say, clients have been charging thousands of dollars in bulk mail items. If that trend continues, the Postal Service estimates it would be paying $100 million a year in interchange fees.
The Postal Service began an 18-month pilot program accepting credit cards at the end of 1993, involving 550 postal branches in Washington, Orlando, and Dallas-Fort Worth.
Consumers charged nearly $29 million on Visa, MasterCard, and Discover cards, and the Postal Service said that transactions averaged an estimated $50 each.
Based on those numbers, the Postal Service Board of Governors approved the national plan, which is expected to be fully implemented in the spring of 1997 at 35,000 branches around the country.
William Westervelt, a principal for First Annapolis Consulting, Annapolis, Md., said that the use of credit cards for postal transactions was only meant for retail customers.
"When it becomes a commercial transaction, it is no longer economical for the post office. The interchange is too great," he said.
"When we set up our contract with the Postal Service, it was for retail transactions only," said Sandra Stairs, manager of corporate relations for Visa. "Bulk mailing isn't usually processed at windows."
Nevertheless, she added that in some locations, bulk mailing may have occurred at retail windows.
Mr. Curran contended that Visa's contract only specified business done at retail windows and that "you can make payments there if you're a bulk mailer. We can't differentiate between retail or wholesale."
Mr. Curran said that product limitations, which took effect in March, were the only way to control the potentially enormous interchange rates that bulk mailings and other high-volume transactions would have generated.
"Our policy is that if you accept our credit cards, you cannot restrict the amount (charged on the card), except according to the limit of the card itself," Ms. Stairs said.
The Postal Service is the first inroad that the associations have made into government services. It is expected to be the largest card accepting merchant in the country
Last year, the Postal Service had total revenues of $57 billion, and Mr. Curran estimates that $27 billion came from bulk mailings.
He said that projected postal credit card sales would range from 5% to 10%.
MasterCard officials could not be reached for comment.