MSE News: Credit and debit card fee clampdown begins

tferry21

On the 5th November 2013 I brought a laptop from Currys for the price of £529.
They had a "pay nothing for the first six months" deal, after which you had the option of paying off the outstanding balance or going onto a payment scheme where you paid £20.44 for 36months.
It all sounded pretty good to me, so I put down a deposit of £52 and walked out of the store with a shiny new laptop.
On the 9th April I get a letter from Creation Finance Ltd saying that my six months have almost expired and I have until the 5th May to pay the balance £501.10. This figure is the balance of the laptop PLUS a £25 administration fee.
Although I was annoyed about the £25 administration fee, I accepted it and today phoned their 0871 number to make my payment.
After going through the laborious automated system, giving my credit card details etc they hit me with the hidden charge of 4% on all debit & credit card payments.
4% on my balance of £501 is £20!!!!
So in addition to having to pay the "administration fee" of £25, they also add a charge of £20 for the privilege of paying by credit card.
So now I'm £45 out of pocket!
I'm so disgusted, Currys did not make clear at point of sale that these charged would be applied, in fact they sold it to me as six months interest free credit!

Do I have any recourse?

Roger1

tferry21 wrote: »

Do I have any recourse?

Plenty of discussion in the separate thread you started.

https://forums.moneysavingexpert.com/discussion/4551925

LemonJelly3_2

Still no movement from EventBrite, Ticketmaster etc.

Is this regulation DOA?

mouthyman

ColinB wrote: »

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 ?

The new rules are a step in the right direction. However to be fair on traders, the merchant services who state that credit cards have to be charged on a percentage basis, should be told that the days of having their cake and eating it are over. There is a clear cost of operating debit cards and credit cards are pieces of plastic that conduct the same business as debit cards in reality. It is just a method of the merchant enjoying the size of the transaction. This should be stopped forthwith!!

Now back to the traders: The internet ones who will never accept cash or wait for a cheque should never be allowed to charge to "pay for paying". They should just build it into their general costs of trading and those who have good prices and treat customers well will not have a problem as the customers not only will return, but should send their friends to the same trader. Also the trader does not need to spend time getting the sale only for it to go wrong at the last moment and the customer walks away.

However currently they are allowed to charge what it costs under these new rules. We should start challenging them to prove they are not profiteering and for them to provide verifiable evidence. It may be more hassle than it is worth for the trader to show that it is 75p per transaction.

aleph_0

mouthyman wrote: »

The new rules are a step in the right direction. However to be fair on traders, the merchant services who state that credit cards have to be charged on a percentage basis, should be told that the days of having their cake and eating it are over. There is a clear cost of operating debit cards and credit cards are pieces of plastic that conduct the same business as debit cards in reality. It is just a method of the merchant enjoying the size of the transaction. This should be stopped forthwith!!

Now back to the traders: The internet ones who will never accept cash or wait for a cheque should never be allowed to charge to "pay for paying". They should just build it into their general costs of trading and those who have good prices and treat customers well will not have a problem as the customers not only will return, but should send their friends to the same trader. Also the trader does not need to spend time getting the sale only for it to go wrong at the last moment and the customer walks away.[...]

The other day I paid for a hotel that was free for debit cards, but passed on the percentage for credit cards. This seems reasonable - the principle should be that the cheapest 'standard' method of payment should be included in the advertised price, but a surcharge can be paid to use other payment methods.

In fact, I deliberately bought the hotel through this particular site because of the transparent debit/credit card fees, which made my purchase cheaper - most of the other sites, didn't have any CC/DC charges, but had priced the room assuming the most expensive payment method, with no discount for using a debit card.

I'm not convinced about changing a CC from % to fixed-fee. The CC company have more legal responsibilities (S75), have a bigger risk of non-payment, and are lending you the money for 'free' for a month. All these costs are proportional to the amount spent.

ColinB

aleph_0 wrote: »

The CC company have more legal responsibilities (S75), have a bigger risk of non-payment, and are lending you the money for 'free' for a month. All these costs are proportional to the amount spent.

Hmm, isn't that why they charge interest ? I thought the point of the new rule was to restrict the CC charge to the actual, reasonable, cost of processing the transaction, not to cover the many and various costs associated with running a credit card company !

aleph_0

ColinB wrote: »

Hmm, isn't that why they charge interest ? I thought the point of the new rule was to restrict the CC charge to the actual, reasonable, cost of processing the transaction, not to cover the many and various costs associated with running a credit card company !

The new rules restrict the retailer to simply passing on the charges the incur for processing the transaction. It's been introduced because evil companies like Ryanair have been hiding the actual cost of a purchase in extra 'fees' in order to gain a competitive advantage. It says nothing about making the CC company charge less.

In some sense, you're right. It would be more transparent to have a fixed fee for CCs, and then the provider charge the consumer a fee. Note that many (most, even?) consumers currently pay no interest, so we are looking at a new fee being introduced at the other end to cover these costs. Such a structure would drastically lower CC use, I expect (not necessarily a bad thing).

bigadaj

aleph_0 wrote: »

The new rules restrict the retailer to simply passing on the charges the incur for processing the transaction. It's been introduced because evil companies like Ryanair have been hiding the actual cost of a purchase in extra 'fees' in order to gain a competitive advantage. It says nothing about making the CC company charge less.

In some sense, you're right. It would be more transparent to have a fixed fee for CCs, and then the provider charge the consumer a fee. Note that many (most, even?) consumers currently pay no interest, so we are looking at a new fee being introduced at the other end to cover these costs. Such a structure would drastically lower CC use, I expect (not necessarily a bad thing).

I would agree with your first point. But not fully with your second.

There is no explicit need for a charge for card use, you don't pay extra in a supermarket, petrol station etc so why should one be applied online? It's purely a commercial decision for the retailer, and one they won't pursue where there are alternatives such as cash or cheque. Interestingly many people get drawin into the fallacy that the no frills carriers are always cheaper, when in actual case where there are alternatives then it is often not the case.

aleph_0

bigadaj wrote: »

There is no explicit need for a charge for card use, you don't pay extra in a supermarket, petrol station etc so why should one be applied online? It's purely a commercial decision for the retailer, and one they won't pursue where there are alternatives such as cash or cheque. Interestingly many people get drawin into the fallacy that the no frills carriers are always cheaper, when in actual case where there are alternatives then it is often not the case.

Sorry, I don't think I was clear previously. ColinB was suggesting that a credit card processing fee being a percentage for credit cards is unfair. My intended suggestion was that if the processing fee for credit cards was fixed to be the same as debit cards (and I would fully expect the debit card fee to be absorbed into the advertised price), then the nature of the 'credit card' products would have to change.

Given the current system, I do feel it's fair to pass on the cost of more expensive payment method (but a debit card payment/cash should always be included in the advertised price). Whether businesses decide to do so is a matter for them. I guess business with reasonable margins to consider it a cost they're happy to include in the advertised price. But in other cases, like the low-cost hotel booking website example I mentioned earlier, which has small margins, passing on the fee for credit cards separately allows me to get the item cheaper on my debit card.

I agree on the sentiment about no-frills. No-frills is a good concept, but it's still possible a traditional provider will be better value, particularly if you go with a no-frills provider, but then end up paying extra to add the frills!

malcolmffc

If credit cards had to use a fixed charge business model, there would be no card benefits (cashback, vouchers etc) and most likely annual fees for all cards.