MSE News: Credit and debit card fee clampdown begins

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  • robbies_gal
    robbies_gal Posts: 7,895 Forumite
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    how is it not applying to them asl them to xplain
    What goes around-comes around
  • ColinB
    ColinB Posts: 70 Forumite
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    reclusive46 wrote: »
    A merchant is charged a set processing fee for debit cards but charged a percentage for processing credit cards. So the processing fee gets higher on a higher transaction.

    I understand that's what the merchant is charged, but you have to look deeper than that at whoever it is levies those charges on the merchant. If the new rule is that the surcharge can only cover the reasonable cost of processing the transaction, how can it be defensible to charge a percentage which - for a big amount - must be way above the actual cost of the transaction ?
  • bris
    bris Posts: 10,548 Forumite
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    They are not allowed to charge excessive fees, they are still allowed to charge what it costs them. These fees will not dissapear but will become much cheaper.

    Debit cards are charged by a small fee of around 25p per transaction no matter how much you spend so it will be illegal for them to charge the £8 some companier were charging.
    Credit cards are charged at a percentage of the transaction, the more you spend the bigger the fee. Percentages vary depending on turnover, a huge company can have 0.5% whilst a small retailer can be 3%. The bigger companies fees will be lower than the 2.5% they charge.
  • reclusive46
    reclusive46 Posts: 2,698 Forumite
    bris wrote: »
    They are not allowed to charge excessive fees, they are still allowed to charge what it costs them. These fees will not dissapear but will become much cheaper.

    Debit cards are charged by a small fee of around 25p per transaction no matter how much you spend so it will be illegal for them to charge the £8 some companier were charging.
    Credit cards are charged at a percentage of the transaction, the more you spend the bigger the fee. Percentages vary depending on turnover, a huge company can have 0.5% whilst a small retailer can be 3%. The bigger companies fees will be lower than the 2.5% they charge.

    One thing I don't quite get with the law though is the credit card charge. Some cards cost more than others. I.e. MasterCard, Visa, American Express all have slightly different costs. Are they really going to charge what that particular card networks charges or an average cost?
  • dzug1
    dzug1 Posts: 13,535 Forumite
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    reclusive46 wrote: »
    One thing I don't quite get with the law though is the credit card charge. Some cards cost more than others. I.e. MasterCard, Visa, American Express all have slightly different costs. Are they really going to charge what that particular card networks charges or an average cost?

    Almost certainly an average - the 'cost' of one transaction is going to vary continuously anyway depending on the volume going through at any one time.

    I suspect it will backfire anyway in the form of higher prices all round.
  • reclusive46
    reclusive46 Posts: 2,698 Forumite
    dzug1 wrote: »
    Almost certainly an average - the 'cost' of one transaction is going to vary continuously anyway depending on the volume going through at any one time.

    I suspect it will backfire anyway in the form of higher prices all round.

    Agreed it will work out worse for those who used debit cards for everything and propbably slightly better for those who use credit cards.
  • bris
    bris Posts: 10,548 Forumite
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    reclusive46 wrote: »
    One thing I don't quite get with the law though is the credit card charge. Some cards cost more than others. I.e. MasterCard, Visa, American Express all have slightly different costs. Are they really going to charge what that particular card networks charges or an average cost?
    When I had a merchant account it was with a company called streamline, they charged me 1.9% no matter what credit card was used so I alway had a set fee. Not sure if it's changed now to different fees for different cards, but it wasn't with my merchant account.
  • reclusive46
    reclusive46 Posts: 2,698 Forumite
    bris wrote: »
    When I had a merchant account it was with a company called streamline, they charged me 1.9% no matter what credit card was used so I alway had a set fee. Not sure if it's changed now to different fees for different cards, but it wasn't with my merchant account.

    Some merchant accounts do charge the same for Visa and MC but American Express, Diners, Discover and JCB will all be different.
  • MissAT
    MissAT Posts: 56 Forumite
    It is shameful that any payment can be met with an admin fee, surely this should be part of there normal charges that they absorb from the profit of the goods, rather than an additional charge to the consumer.

    It must be more costly to process money rather than electronic payments.
  • Pete-B
    Pete-B Posts: 7 Forumite
    ColinB wrote: »
    I don't quite understand why the cost of a transaction should be a percentage of the value.

    The banks charge a flat rate for Debit Card transactions and a percentage for Credit Card transactions.

    Retailers seem to forget though, that there are costs and risks of dealing with other methods of payment (e.g. cheques used to bounce, large cash holdings can increase the risk of robbery and cause insurance to cost more (or be invalid if the business hasn't made the insurer aware they hold large amounts of cash)).

    They also forget that taking Credit Cards without stinging the customer can mean extra business (and therefore profit) they wouldn't otherwise have had.

    Regards, PeteB
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