All Charges for Paying by Card to be Banned


#1

I’m hoping this will turn out to be a good thing for banks general; by banning the surcharge for using cards this should hopefully get more people using their cards more often, netting the issuing bank more in interchange fees.

Although the cynic in me sees the companies charging these fees just inflating prices to cover the loss of these fees, I’ll have to wait and see.


#2

I think it’ll be very interesting to see how this plays out but I agree with you @thom_horne I only really see this being absorbed into higher costs regardless of the payment method used. I don’t think the DVLA are going to turn around and say:

We’re more than happy to not have that extra £8.5m in our back pockets towards the Christmas Party

Similarly with EasyJet and the like, they’ve enjoyed that extra money for so long they’re not just going to give it up now. Anyone who’s ‘enjoyed’ a Ryanair flight will know that Mr O’Leary likes to add fees for everything including a failed attempt to charge for using the loo!

For businesses like PayPal, JustEat and the like, it’s really a big part of their business model that I don’t know how they’re going to cope. For example, JustEat currently charge 50p to use a card of any type and it probably isn’t costing them 50p to process the transaction so they’re making a bit more on the side. If they change it to an ‘admin’ fee, I imagine they’ll be penalised so do they drop it altogether and lose out, or do they charge the fast food outlets more fees which may lead to some customers leaving.

I also wonder if this will lead to some places simply going back to not accepting credit and/or debit cards or not allowing card transactions under a certain amount. Whilst they’ll be government legislation to stop people charging overly extra, there’s no mandate to make people accept cards. I can imagine this being especially true for smaller businesses who I imagine will not longer be able to say: transactions under £x are subject to a 50p charge or similar.

Will some businesses go back to only taking debit cards? I remember a day when Aldi was cash-only and then when they did it was only debit cards and even then I think it was only one brand of debit card that was allowed,
it wasn’t until 2014 that they started accepting credit cards.

.


#3

You don’t get a discount for paying cash, but businesses incorporate the credit card charges they have into the price of the goods?? This used to be explained in receipts years ago, and always seemed a bit murky then.

I agree that there should be no charges for debit card use, that’s just sharp practice by those firms. They pay to process either cash or cheques and debit card charges are no more.


#4

I’m actually surprised that some companies are still entirely cash only. Hiring the manpower alone to count, sort and manage the cash can surely in some cases equal or near the amount added in fees by having a card terminal?

I guess each business is different. :man_shrugging:


#5

Monarch is offering a 10% cashback on purchases using an american express card. I would like to see this happening with other credit card providers.
http://www.monarch.co.uk/offers/flights/amex?mid=OS:FLY:home:Pod6::


#6

EasyJet have a £10 admin fee on every booking to cover such costs. This is included in the fare - and therefore not included in this new directive.


#7

Expect the costs of goods/services to rise instead, but card usage will be free!!


#8

The real thing that should be banned is card acceptance fees for merchants. Processing card transactions is a completely automated process that should be totally almost free or around 1p or so, not more.


#9

Whilst some prices might go up to absorb the previous card charges - there’s still overall the general consumer ‘capitalist’ factor as well.

So, Cinema tickets are one where it’s easy to see the difference between the ‘pay at the door’ and ‘pay online’ price (£1.50 at my local cinema to pre-book online).

But there’s 2 local cinemas. So, if Cinema A puts up all their ticket prices by 50p to cover the lose of the card charges, but Cinema B doesn’t - and then gets 50% more tickets sold, then Cinema A might then reconsider their pricing…

Also, at some point the Government and the Banks needs to make a solid decision on pushing the country towards a cashless society anyway. So, when I can pop into my local corner shop, and buy a Mars bar with Applepay with neither me nor the shop having to pay more - that’s what we should be working towards.

Or, alternatively, the Government should accept that cash is here to stay - and make sure that everyone has access to it fairly which would mean basically ‘nationalising’ the ATM network - scrapping all fees for using ATMs/Cash machines and have the Government/Local Council decide on the location of them so that everyone can get access to their cash.

I’m sure if the Government gave the bank industry of choice between those two options - the industry would concentrate on sorting out moving to a full cashless society (which saves everyone money in the end - from lost coins down the back of the sofa, money stolen, to the cost of printing notes and coins and transporting it around in secure trucks…)


#10

Interchange fees can really help a start-up bank like Starling. Currently Starling receives 0.2% of everything you spend on your Starling Debit card. This is paid to Starling by Mastercard and funded by the fees merchants pay to accept card payments. These small revenue streams make “free” banking possible. If merchants stop paying to accept cards, then interchange would stop and I suspect banks would charge us each time we use our card.

The 0.2% figure is applicable to Mastercard debit. Card issuers receive 0.3% on Mastercard credit. In the case of Apple Pay, Starling will share their interchange revenue with Apple.

The system works fine as it is, merchants just need to stop moaning and pay up. Most small merchants who refuse to accept cards are not doing it due to the costs, they are doing it for creative accounting purposes. There are exceptions of course but it’s very common.


#11

This is a massive win for consumers.


#12

I wonder how this will affect small shops and retailers (e.g. the local corner shop). I think the charges for accepting card can be quite high, especially if someone is just buying a pint of milk or a newspaper.

Not that I am defending these sorts of charges, it’s just another way of looking at this.


#13

@DanielWebb you’re absolutely right about small retailers, but in reality nothing will change, many of them already don’t accept cards under £5.00 (rather than charging a surcharge) and can and will continue to do that. It’s not all cost based either, there are material costs to bank cash too, but those are less well understood or accounted for.

Having worked in payments for 15 years, I would say the overall legislation has been poorly reported and largely misunderstood by the public. What makes up a merchant service charge for a payment, comprises much more than a profit margin for Visa and MasterCard, or indeed interchange for an issuer like Starling. Some of it is fair game.

Consider the poster children for card surcharging: airlines and event tickets. They are not simply more greedy for booking fees. They are industries that sell services often on a 6-18 month lead time. When you use your credit card, the consumer credit act gives you the right to dispute and recover your funds any time until the service is received.

That creates a large exposure - and someone has to pay for it. The airline/event needs cashflow so receives the payments, but the bank that provides merchant services has to hedge this exposure by increasing deductions on the payments. Partly as temporary hold, but also as a larger fee to cover costs of managing risk. Airlines do not pay 0.3%!

In effect this produces a far higher payments charge to these industries, which they’ve historically passed on. It isn’t trivial either, I’ve seen airlines and even concerts/festivals bankrupt payment companies! So part of the real conversation on “win for consumers” should be: how much do you want protection on these long term purchases you make?

Sadly, I suspect in this and other areas, the law of unintended consequences will prove that while welcome, these changes don’t end up being entirely positive for consumers.


#14

Really interesting insight @rob2775. Thanks.


#15

Agreed - never looked at it from that point of view. Thanks @rob2775!


#16

Thing is, ‘money’ isn’t just coins and notes you hand over in exchange for something, it’s a concept. It evolved as a universal token to say ‘I’m solvent, trust me to honour my debt to you’. Way back when you’d have a pile of grain, and someone else might barter it by exchanging a coop full of chickens :chicken:. Over time, you’d come to trust who to do business with by who became trusted, and ‘money’ just became a token of that trust, mostly because it was easier to write on a slip of paper than carry around that coop of chickens :chicken:. In time the state backed that guarantee, so by handing over a tenner, you’re effectively saying ‘I’m solvent for this amount, and the state backs my solvency’.
We’ll never get to a cashless society, no matter how much trendy hipsters want to be able to use their contactless cards, because you’ll never take away from the simple promise that you’re ‘worth’ an amount of ‘value’. If the UK removes coins and notes as we know it, those that can’t or won’t take part in this cashless society will just invent something else that becomes a token of their trust in one another’s solvency, and so ‘cash’ will just be reinvented.

You’ll never see a ‘cashless’ society. You might get something else instead of tuppences and fivers, but you’ll never get rid of that ‘concept’


#17

I’m surprised the government haven’t pushed for a cashless society. No cash means no backhanders or being a bit light on the accounts, if everything was card there would always be an audit trail (read bigger tax receipts!).

In Greece, I believe that it’s going to be law by the end of this month that retailers must take cards in certain industries/services where there must have been a drop in tax revenue. Having been to Santorini recently, card usage is not that high.

Surely cheaper for shops and everyone else if there was no cash. Controversial I’m sure, but most of the Nordic countries aren’t far from that now.


#18

Seems like this is something that should’ve been done years ago.


#19

Ultimately those who will continue to lose out are those on a limited income but I personally believe the charges should stay. Drop the charges and the price will more than likely go up, you can’t legislate on what something costs. I think we’re all expecting that to happen so it won’t be a huge shock when it does but it should be left as it is.

As we move towards a cashless society and bring financial inclusion to the unbanked we need to make sure that those precious pounds and pence aren’t ripped from their hands and I don’t think this will help.

There are costs involved for small and large businesses when accepting card payments. Terminal fees and compliance. A business will more than likely also be paying for their banking facilities. The hardest hit will be the smaller business as they will have to work out where to recover the costs. This law adds complexity and may remove choice. Utter madness.


#20

You only have to look at the fiasco with directory enquiries to know how well a government will handle this!!!