Nope. Not surprised that MS is raising prices.

Also, MS doesn't pay those CC transaction fees. Remember, MS sells to distributors, and distributors sell to stores. Stores always pay transaction fees associated with purchases made through CC. There is literally no difference in moving from points to currency. Everything is still bought and paid for the same way.

Surprised? You still shouldn't be. The only thing that has changed is that you pay more.

EDIT: Oh wait, there is one change now, I guess, now you can't go on Ebay and buy 25$ worth of points from America and pay for it using a strong currency. That's gone.

Looks like the prices are dropping in Australia slightly and should stay the same in the US.

There is always an exchange rate penalty.  Do you think banks on any level just provide services for free?  NO.  There is a fee for every financial transaction that involves an exchange of foreign currency.  Microsoft is a US company.  Regardless of whether it does business in the UK or Canada, the company has to at some point perform an exchange of currency, for which it incurs a fee.

This is one of the reasons why US companies refuse to do business with consumers outside of the US.  Not to mention the shipping expense, as well as import fees.  Nevertheless, once you get over those two shockers, the retailer then finds out the bank took a cut.

Don't believe me?  Take your ATM card, go across the border, and use it in the US to withdraw US funds.  The first hit you'll take is likely a $3.00 ATM fee, which is expected, but then next up will be a currency exchange fee. 

Explain how the transactions are different now, instead of using vague overarcing scenarios.

Previously, to my understanding, what a customer would do, is go to xboxlive or go to game store and buy a card using a credit card or cash.
For the xboxlive direct point purchase, MS pays a CC fee. For the store, MS sold to a distributor, and then that distributor sold them to the store, and then the store pays a CC transaction fee when someone comes in and buys the card with a CC.

What has changed in terms of costs to MS?
It cost more to buy an ms points card in UK than it did in the US, because of the currency. What's so different now?

Um on Xbox LIVE Microsoft pays those fees.  We're talking Xbox LIVE.

Also Microsoft Point cards had an MSRP.  1600 MP = $20, however they also had margin.  Meaning Microsoft, as well as Nintendo, sold their cards to retailers for less than the face value.  So while YOU paide $20 for 1600 MP card, the retailer only might have paid $15.00.  Subsequently, they have a 30% margin.

So yes, the retailer may have paid a CC fee if you paid with a CC, but that only cut into their margin. 

Microsoft stated back in 2000 or 2001 when it announced its plans to go with it's own virtual currency, that the two reasons it did was because of exchange fees and credit card fees.  And the stated problem with those thing things was that both drove up the cost of content.

So the prices are on par with Steam and PSN.

If you bought your Microsoft Points through Microsoft, you paid face value.  It was NEVER a good idea to buy your Microsoft Points from Microsoft, same with the Xbox Live subscriptions.  Retail cards are sold MSRP, that is they're sold with margin.  Microsoft and Nintendo both did this.  Sony did not, Sony's cards are face value cards.  As I described elsewhere, a 1600 MP card may cost you $20, but it cost the retailer $15.00.  That margin, gives the retailer the ability to take a profit, incur some expenses, and even put the cards on sale. 

Anyway, when you go onto Xbox LIVE and purchase that content you're purchasing that content from an American company.  Microsoft, in order to accept that purchase in local funds (GBP), has to perform a currency exchange.  Or more correctly the bank who is performing the transaction does.  With Microsoft Points, the same issue existed if you purchased your points from Microsoft, but if you went retail (which was actually the more popular method of obtaining points) there was, as stated above , margin for the retailer to absorb any fees.  Which for them the currency exchange would not be one of, since they're a UK business doing business in the UK.

With Microsoft Points, VAT was included in the price of the Microsoft Point cards.  Now with real-world currency, prices need to reflect VAT as well.  This means that any content has to reflect a 20% VAT if the price of the goods wasn't previously aligned (because I'm sure there's margin in XBL goods too).  In the US, this means each and every State will be different.  Where as previously, I didn't pay taxes on goods because in my state MP cards are exempt from taxes, I will be charged sales tax for the Xbox LIVE purchase because Microsoft does business in my State and by law because they do they have to charge sales tax for online purchases.  For some states, this won't have an impact, they either already pay or they have laws against online sales taxes.  But for the vast majority of people across the US this is gonna bite.  You won't see it in the XBL price, an item will be price the same regardless of where you live, but when you go to check out, the price will reflect any sales tax.

Microsoft Points were, in every way, better.  Only stupid people thought they were worse or a scam.

Yes.

1 Yeah, so nothing has changed. You do know that users still had to pay with their cc to buy points through LIVE
2 Yeah, and there won't be a difference here, either. The cards will say 20$, the retailers will pay 18$, the distributors 17$.
3 Right, so nothing has changed.
4 *shakes head* You do know that the whole reasoning behind it was that MS would rather have you pay 20$ one time, than 5$ four times.
It saves them roughly 50 cents or so...and yet, they'll still be selling the dollar value cards, and will likely have you purchase in quantities on LIVE.

They still pay the same percentage, it's just now they'll be skipping the smaller charge, which is usually about 10-15 cents for a big retailer.
So even if you spent that 20$ buying 20 1$ items, the most they'll lose out on is about 5%, meanwhile, your cost went up 35%.
And trust me, there are still ways to push sales around, like not expensing until the end of the month, and other tactics like simply holding your cc info, so they can collect all at one time.

It's not rocket science.

You would have seen a Price hike anyway. This is just a covenant escape goat.