Merchant charges

withnell

Is there any difference in the processing of debit and credit card payments that justifies the differing charges for each method?

dazza.mk

Debit cards are a fixed fee, credit cards are a percentage of the transaction.

dzug1

Debit cards are just a transaction, carried out at a flat rate normally. The merchant is creditted instantaneously or overnight, as is the bank account of the customer debitted

Credit cards are a means of lending money - the % merchant fee is where the CC company makes its money where the customer pays off each month. The merchant still gets creditted immediately, but the card company is down by the amount of the purchase until the customer pays it off.

Rafter

The 'interchange' fee that a merchant pays for credit cards is variable.

The fee will depend on the risk the credit card company is taking. So a travel company or a sofa retailer will pay a higher fee because customers are more likely to make a claim if something goes wrong, leaving the credit card company liable.

Someone like Tesco will probably pay a very low interchange rate.

Personally I don't think Ryanair etc should be legally allowed to charge more for using a debit card. A debit card is cheaper for them than accepting cash (ie legal tender when the costs of safes, security, bank charges etc are taken into account) so how can they legally charge for debit cards.

If retailers want to discourage customers from using a credit card then I guess they can do so - it is a competitive issue - but they will probably lose market share to competitors who do accept them.

R.

dzug1

Rafter wrote: »

Personally I don't think Ryanair etc should be legally allowed to charge more for using a debit card. A debit card is cheaper for them than accepting cash (ie legal tender when the costs of safes, security, bank charges etc are taken into account) so how can they legally charge for debit cards.

Because what they can legally charge has next to nothing (possibly nothing at all) to do with what it costs them. It might not be a good thing that this is so, but it is.

A merchant could quite legitimately charge extra for cash if they were so minded.