MSE News: Government to ban debit and credit card surcharges

chattychappy

wizk1 wrote: »

But surely, isn't the whole aim of this to charge a proportionate amount to the costs incurred by the retailer? A fixed figure isn't proportional.

Therein lies a problem. Retailers might argue that part of the cost is fixed, and in some cases it might be. Some might pay a fixed monthly fee for the facility which covers (or doesn't cover) a turnover up to certain figure.

What is the real purpose? Is it to stop "greedy" profiteering? Or stop "shock" for consumers when at the point of sale the price suddenly turns out to be a lot higher.

Take one retailer that is charged 1% and another 5%. Let's say they both decide to surcharge CCs by 3%. For consumers, the effect is the same. At checkout, they will be told they've got to pay 3% more for both firms. But in one case it will be legal, in once case it won't be.

Hmm...

That's why I'm in favour of rules to make these surcharges clearer and more upfront. But not rules that attempt to fix them, whether by reference to the cost incurred by the retailer or otherwise.

fairdoos_2

opinions4u wrote: »

The key line is this:

That doesn't look like a ban on surcharges to me. It actually looks like an encouragement to charge a fee for more expensive transactions (e.g. credit cards).[/What are "Visa" and "MasterCard" doing about it? years ago you were told by these organizations that you should not be treated any different to a cash customer.

Elladings

It's not as black and white as many people seem to think it is. I run a holiday business and we get charged 27p for processing debit cards and 3.25% (of the total transaction value) for processing credit cards (it's far more for AMEX actually). We don't charge the customer for debit cards as 27p is a minute amount on holidays costing hundreds of pounds, but we do charge 3% for processing credit cards - which doesn't quite cover our costs of course, but if we tried to charge more, people wouldn't believe it was actually costing that much and feel we were being deceitful, so we pay the difference ourselves.

Many people who aren't involved in taking card payments, don't realise that the rate the credit card companies charge the retailer is based upon volume of sales, so for a small business like ours, we will be paying far more than the big nationals, who will have negotiated much lower rates, typically 1-2% or less.

If the government directed we could no longer make a surcharge for card payments (credit cards in this case), we would have to recoup the cost somewhere, certainly WE shouldn't have to pay this, especially when the customer using the credit card is benefiting by a month's free credit. Ultimately this is why the credit card companies charge the retailers and airlines, to recoup the costs of providing free credit - of course they do nothing for free!

Some people are suggesting that the cost just be added onto the overall 'holiday' (or flight or whatever) cost, but you cannot just add 3% across all your prices. The reason we don't do that is because EVERYBODY would be paying the extra 3%+ then. We couldn't differentiate between the people paying by debit card, credit card, BACS, cheque and cash, but it would only be those transactions made by credit card that would be causing us to incur the extra charge, not the other payment methods. So how unfair would that be on the people NOT using credit cards? We would have to forecast an annual surcharge total and calculate a percentage with which to increase our prices by - but still the customer NOT using a credit card would be paying the extra when they shouldn't have to.

I'm not speaking for the airlines here, as some are indeed sneaky and underhand in the way they market their flights, but in our case, I feel it's a fair system for us and the customer. The credit card user, in being charged 3%, is effectively paying for their month's free credit (as we hand it - and more - to the credit card company), but lets not forget that the credit card holders also get free holiday insurance - insurance that the customers paying by all other methods don't get and have to pay around 3% (coincidentally!) of the holiday cost for. Some of them also get cashback on their card purchases, which also goes a long way to offsetting the surcharge.

The answer is not to ban retailers from charging the surcharge, as the customer will end up just paying more at the end of the day. The answer is to bring in legislation to ensure that all companies clearly state up front, at the point of marketing (rather than the point of sale) that there is a card surcharge and how much it is likely to be. The customer can then clearly see what the end price is likely to be if they use their credit card rather than a debit card. I also think the general public could be made more aware of the fact that the rates charged to retailers by the card companies DOES vary according to volume. I had a customer call a few months back who gave a load of verbal abuse down the phone about how deceitful and greedy we were in charging 3% for credit cards. It turns out he had watched a programme on the TV the night before highlighting this whole issue and the message he got from it was that ALL retailers only get charged around 1% but charge the customer far more and pocket the difference! He just didn't want to believe me when I tried to explain that wasn't the case, which was very annoying to say the least when we feel we are doing nothing wrong.

chattychappy

elladings wrote: »

the answer is to bring in legislation to ensure that all companies clearly state up front, at the point of marketing (rather than the point of sale) that there is a card surcharge and how much it is likely to be. The customer can then clearly see what the end price is likely to be if they use their credit card rather than a debit card.

Yep, exactly!

BigVern

Will the Government practice what they preach? I paid for my car tax a few days ago and the DVLA (a Government agency) wanted to charge me £2.50 to pay using my credit card. What's good for the goose - other cliches are available...................

Boracic-lint_2

I am with TalkTalk (I know, I know) and when I registered with them, back when they were Tiscali, I pointed out I could not do a Direct Debit because my pensions were paid at different dates in the month, and the Debit could go out when nothing was paid in = bank charges. Also Direct Debits are a No No for me - bad previous experiences.
We agreed that I pay online by giving them direct access to my Credit Card. No paperwork billing involved, I just get an email saying my latest account is now available to view, and giving the date when payment will be charged against my card.
At some stage of my custom, I cannot remember when, a charge of 99p was added to my monthly bill to cover their 'Recurring Card Payment Fee'.
In January 2011 this was increased to £1.99p per month. This is approximately 10% of my monthly bill. I tried via their online forum to challenge this amount but got nowhere "Frontline staff are not allowed access to this information........". I tried email and letters but nobody 'seemed' to know how much it costs TalkTalk to process my card payment.

Boracic-lint.

chattychappy

I refuse to sign DDs too. T-Mobile introduced a fee (when they were One2one) for non-DD payments so I phoned them up and argued they weren't entitled to introduce it mid-contract. They agreed, but asked if they could give me a "loyalty discount" of the same amount cos their billing would be easier. I agreed. Later they changed the rules so that there would be no fee for payment by internet banking - so now I'm quids in. So shop around is my advice. I had a client in the cable TV business (some years ago). They said that the real reason for charging more for non-DD was not the processing fees (though that was part of it). The real reason was that once people signed a DD they were less likely to notice the bills and cancel. The "churn" rate was lower. People who paid the bill manually were much more likely to decide they could do with out. So they always tried to get DDs signed.

I digress.... the reality is that it's quite difficult to come to a view about what a payment type "costs" a supplier. We just had a thread from a retailer who lost £720 following a chargeback because a card turned out to be stolen. If, say, your margin is 20%, you need £5 of business for every £1 lost in this way. Are suppliers going to be able to build in the "fraud factor" when measuring the cost of certain payment methods?

zagfles

Elladings wrote: »

It's not as black and white as many people seem to think it is. I run a holiday business and we get charged 27p for processing debit cards and 3.25% (of the total transaction value) for processing credit cards (it's far more for AMEX actually). We don't charge the customer for debit cards as 27p is a minute amount on holidays costing hundreds of pounds, but we do charge 3% for processing credit cards - which doesn't quite cover our costs of course, but if we tried to charge more, people wouldn't believe it was actually costing that much and feel we were being deceitful, so we pay the difference ourselves.

Many people who aren't involved in taking card payments, don't realise that the rate the credit card companies charge the retailer is based upon volume of sales, so for a small business like ours, we will be paying far more than the big nationals, who will have negotiated much lower rates, typically 1-2% or less.

If the government directed we could no longer make a surcharge for card payments (credit cards in this case), we would have to recoup the cost somewhere, certainly WE shouldn't have to pay this, especially when the customer using the credit card is benefiting by a month's free credit. Ultimately this is why the credit card companies charge the retailers and airlines, to recoup the costs of providing free credit - of course they do nothing for free!

Some people are suggesting that the cost just be added onto the overall 'holiday' (or flight or whatever) cost, but you cannot just add 3% across all your prices. The reason we don't do that is because EVERYBODY would be paying the extra 3%+ then. We couldn't differentiate between the people paying by debit card, credit card, BACS, cheque and cash, but it would only be those transactions made by credit card that would be causing us to incur the extra charge, not the other payment methods. So how unfair would that be on the people NOT using credit cards? We would have to forecast an annual surcharge total and calculate a percentage with which to increase our prices by - but still the customer NOT using a credit card would be paying the extra when they shouldn't have to.

I'm not speaking for the airlines here, as some are indeed sneaky and underhand in the way they market their flights, but in our case, I feel it's a fair system for us and the customer. The credit card user, in being charged 3%, is effectively paying for their month's free credit (as we hand it - and more - to the credit card company), but lets not forget that the credit card holders also get free holiday insurance - insurance that the customers paying by all other methods don't get and have to pay around 3% (coincidentally!) of the holiday cost for. Some of them also get cashback on their card purchases, which also goes a long way to offsetting the surcharge.

The answer is not to ban retailers from charging the surcharge, as the customer will end up just paying more at the end of the day. The answer is to bring in legislation to ensure that all companies clearly state up front, at the point of marketing (rather than the point of sale) that there is a card surcharge and how much it is likely to be. The customer can then clearly see what the end price is likely to be if they use their credit card rather than a debit card. I also think the general public could be made more aware of the fact that the rates charged to retailers by the card companies DOES vary according to volume. I had a customer call a few months back who gave a load of verbal abuse down the phone about how deceitful and greedy we were in charging 3% for credit cards. It turns out he had watched a programme on the TV the night before highlighting this whole issue and the message he got from it was that ALL retailers only get charged around 1% but charge the customer far more and pocket the difference! He just didn't want to believe me when I tried to explain that wasn't the case, which was very annoying to say the least when we feel we are doing nothing wrong.

You still will be able to charge what it costs you, as mentioned in the article, and several times in this thread. Why do people keep missing this point?

The move follows a call by the Office of Fair Trading (OFT) for the fees, often added in the final stages of a transaction, to be banned for debit cards.

But this goes further, banning profiteering on all forms of payment by the end of 2012. Businesses will only be able to charge what it costs them to process the transaction

So there is no problem whatsoever with you retaining your current charging policy.

This is designed to stop the likes of RyanAir's £6 per person per flight "admin fee" which can add over 50% to the cost, as above.

zagfles

Boracic-lint wrote: »

I am with TalkTalk (I know, I know) and when I registered with them, back when they were Tiscali, I pointed out I could not do a Direct Debit because my pensions were paid at different dates in the month, and the Debit could go out when nothing was paid in = bank charges. Also Direct Debits are a No No for me - bad previous experiences.
We agreed that I pay online by giving them direct access to my Credit Card. No paperwork billing involved, I just get an email saying my latest account is now available to view, and giving the date when payment will be charged against my card.
At some stage of my custom, I cannot remember when, a charge of 99p was added to my monthly bill to cover their 'Recurring Card Payment Fee'.
In January 2011 this was increased to £1.99p per month. This is approximately 10% of my monthly bill. I tried via their online forum to challenge this amount but got nowhere "Frontline staff are not allowed access to this information........". I tried email and letters but nobody 'seemed' to know how much it costs TalkTalk to process my card payment.

Boracic-lint.

A CCA (continuous credit authroity - ie a recurring payment) on a credit card is far more trouble if it goes wrong than a DD. There is no mechanism to cancel a CCA with the card company, not even closing the account. DD's are easy to cancel, and to reverse if they take the wrong money/on the wrong date.

I've paid for everything I can by DD for the last 20 years or so, and any problems I've had were simple to sort out. You just demand an immediate refund and the bank have to give it.

Whereas you can only cancel a CCA with the retailer, and if they don't play ball it can be a major PITA to sort out.

copperfield27

Elladings wrote: »

It's not as black and white as many people seem to think it is. I run a holiday business and we get charged 27p for processing debit cards and 3.25% (of the total transaction value) for processing credit cards (it's far more for AMEX actually). ..

Many people who aren't involved in taking card payments, don't realise that the rate the credit card companies charge the retailer is based upon volume of sales, so for a small business like ours, we will be paying far more than the big nationals, who will have negotiated much lower rates, typically 1-2% or less.

They also don't realise that the oft quoted "20p for a debit card" doesn't apply to all types of debit card - we are a small charity and we're charged 39p for Maestro debit which we absorb but 4% for Visa/mastercard cards regardless of whether they are debit or credit which we do have to pass on.

We do make the surcharge clear up front so won't be affected by the legislation but Elladings makes the very fair point that consumers can be led to thinking we are profiteering because the reporting of this issue is often misleading.