Can A UK Merchant Charge A Customer A Fee To Pay On A Credit Card?

ashburnham

We are a business that takes both credit and debit cards. A recent review of the charges that our acquiring bank makes left us quite shocked.

An example would be if we take a transaction of £300 (a relatively average payment). If the customer pays on a debit card it costs us a fixed fee of about 25p - not a big deal. However if the customer pays on a credit card it costs us about £6.78!!! Credit card payments are charged on a percentage basis so if the transaction is higher then so is this fee.

Immediate thoughts here were to (reluctantly) add a percentage charge to all credit card payments to reduce this cost to us. Don't get me wrong, we don't want to do this as it gets my back up when I see companies charging a "credit card fee" but this is a substantial cost in my line of business and the charge is more to encourage debit card payments.

Encountered a problem though... reading MasterCard merchant rules found online (page 91 of this PDF) suggests merchants can't make a "surcharge" for accepting credit cards. There appears to be certain ways round this such as adding a "convenience fee" to all transactions to cover costs but this has to be applied to all payments (cash, cheque, debit card and credit card) - not what we want to do really.

My question is (eventually - sorry!) how do companies get away with charging for credit card payments (example) when card rules seem to say you can't do this?

nomoneytoday

You can. But I won't shop anywhere that does out of principal.

(I get cashback and section 75 cover by using the card)

ashburnham

nomoneytoday wrote: »

You can. But I won't shop anywhere that does out of principal.

I agree with not shopping with companies who charge a fee out of principal but only if the same price is available at another company that doesn't charge.

I personally wouldn't go to another company if their price is 5% more than the company that charges 1% for paying by a credit card (if that makes sense?!). Some businesses seem to charge it as the norm (i.e. travel agents).

Anyway, I divulge... Do you know where it says I can make a charge? Like I say, everything I read says I can't.

co123456

Sometimes when I'm in this situation, I'll take a credit card out of my wallet then ask the trader if he will accept a discount if I pay using a debit card. It works from time to time. Have you thought about openly offering a discount if the customer pays by debit card?

In a negotiation course I took a while back, the teacher recommended carrying a American Express card just for the purposes of negotiation. The idea would be to flash the card (expensive fees to the trader) then suggest a cash discount.

ashburnham

cheeryoleary wrote: »

Have you thought about openly offering a discount if the customer pays by debit card?

We would be happy to do this but once again I'm going back to the merchant rule book (also on page 91 of PDF link in first post) which says (and I quote):

A Merchant must not engage in any acceptance practice that discriminates
against or discourages the use of a Card in favor of any other acceptance
brand.

I read this to say I can't give a discount for a Maestro Card (debit) over a MasterCard (credit)?

Maybe I'm reading the wrong rules (it does seem to be a US link but I was directed to it from UK website)?

williham

I don't think there's any rules like this in the UK, as travel agents do it all the time, so do ryanair.
What the supermarkets do is add a percentage to all transactions so that the people that pay by cash and debit card are slightly subsidising people who pay with credit cards.

You could work out how many people pay with credit cards, then work out how much the fees would be if split over all payment methods and charge the same, slightly higher amount to everyone.

Or you could just say credit cards attract a 2% fee..

Eric_Pisch

I certainly wouldn't shop anywhere that surcharged me for using my card.

co123456

williham wrote: »

Or you could just say credit cards attract a 2% fee..

My Farm Shop does this and I'm happy to play along as I know they are a small independent business who I'd like to keep trading.
For other 'larger' businesses, the additional 2% is a turn off.

Eric_Pisch

cheeryoleary wrote: »

My Farm Shop does this and I'm happy to play along as I know they are a small independent business who I'd like to keep trading.
For other 'larger' businesses, the additional 2% is a turn off.

yes, a small independent shop like this i would pay the fee if its on low value stuff, thanks for reminding me

Typhoon2000

The law allows you to add a percentage for credit card use. However the card companies dont like this, so often they put it in their contract with the merchant that you cant charge someone extra for paying by credit card. Obviously this is something you can negotiate with your card processor.

ashburnham

cheeryoleary wrote: »

My Farm Shop does this and I'm happy to play along as I know they are a small independent business who I'd like to keep trading.
For other 'larger' businesses, the additional 2% is a turn off.

We sort of fall in the middle (not a small local shop but not a big player by any means). We are a small independent broker that sells insurance services (so everyone hates us already ).

Just phoned HSBC merchant services (our payment acquirer) and they said they could not advise me on this?! All he could say was that we should include any charges we incur in the product we are selling. Well yes, that's obvious I know but in our line of business means this is impossible as we have to declare any additional charges on top of the insurance premium.

As an insurance broker we can make as little as 10% on the price of a policy (after tax is taken off) so when your payment provider is taking 2.2% of the price of a policy (including tax), we are talking about 25% of the money we are making going on credit card charges!

I really don't want to charge a credit card fee as I hate companies that do it as much as all of you guys. Just wanted to encourage people to pay on a debit card where possible without breaking merchant rules as a debit card transaction costs us just 25p regardless of the amount of the policy.