card surcharges

simplealan

When I first had a credit card (too many) years ago, it was written into the terms and conditions that sellers were not allowed to charge different prices for cash v. card purchases.
This is no longer the case. Many online sites now routinely charge extra for using a credit card, some even charge for debit cards.

Does anyone know how, when and why the change occurred?

thebritishbloke

The terms and conditions of your card can't stop a shop from charging more, it's the law that sets that rule.

There was previously no law that said you can't charge for card transactions, and there were no caps on fees etc either. They recently introduced legislation that you can't charge more than it costs you to process the transaction. Whilst it doesn't have to be an exact amount per transaction (i.e. they might charge 50p per debit card transaction, even if the actual transaction only costs them 20p, because they still have to pay for the card machine, internet connection etc).

p00hsticks

thebritishbloke wrote: »

The terms and conditions of your card can't stop a shop from charging more, it's the law that sets that rule.

I think in the past the card companies made it a condition of their agreement with merchants that they would only allow them to accept their cards if they did not add charges, and there was no law to prevent them saying this - after all, it's a retailers choice if they decide they want to accept card payments or not.

Merchants do get charged by card companies for card payments ( as I recall, a flat sum of around 30p for debit cards, and a percentage charge of around 1-2% for credit card transactions, plus they'll be making monthly charges to a comany for the equipment and handling the processing) so it makes sense that they are allowed to pass those costs to the customer if they wish (there are obviously costs associated with taking payments by other methods such as cash as well)

thebritishbloke

p00hsticks wrote: »

(there are obviously costs associated with taking payments by other methods such as cash as well)

I've always found it odd that they charge for credit card transactions, when most retailers (even small businesses) will not be charged more than 3% for these transactions. Yet when you pay in cash, they have to pay someone to count and bag it up, they then pay the bank to take this cash from them. Surely the difference is negligible, yet for card transactions they insist on charging it, but in cash, it's just taken from the product margin.

chattychappy

simplealan wrote: »

Does anyone know how, when and why the change occurred?

Simple answer is 1991.

Before then, the networks were free to impose on merchants an obligation not to surcharge CCs. This was felt to be unfair by the Monopolies and Mergers Commission - so under the Fair Trading Act 1973, the Credit Cards (Price Discrimination) Order 1990 was passed which meant that any contractual term attempting to prevent surcharging was only enforceable to the extent that the merchant was surcharging by more than the cost of acceptance. Ie the CCs couldn't prevent merchants passing on CC acceptance costs. The Order came into force in 1991.

Regulation has moved on a bit since - but that was the change. I remember just after the law changed, a woman from Barclays Merchant Services telling me I wasn't allowed to surcharge CC acceptance and my telling her she couldn't stop me!

simplealan

So, that clears that up for me.
I was a little surprised that merchants were ever prohibited from charging for using Credit Cards; after all, it does cost them.
But, Debit Cards are still free ?

reclusive46

simplealan wrote: »

So, that clears that up for me.
I was a little surprised that merchants were ever prohibited from charging for using Credit Cards; after all, it does cost them.
But, Debit Cards are still free ?

Debit cards have never been free, merchants were charged a flat fee. Under a new charging structure though, Debit cards will also be percentage based.

agrinnall

Of course there's no reason why the charge should ever be anything other than a flat fee, it doesn't cost VISA and Mastercard any more to process a payment for £1 than it does for one of £10,000. Although I suspect that if flat fee across the board came in it would probably end up being somewhat higher than the current level applied to debit cards in order for the various parties involved to keep their income levels up.

ic

thebritishbloke wrote: »

Yet when you pay in cash, they have to pay someone to count and bag it up, they then pay the bank to take this cash from them. Surely the difference is negligible

When I worked at Safeways (now Morrisons) they had a cash office in the back, with two massive safes. Twice during the year I worked there there were armed robberies. Large supermarkets take thousands in cash an hour - especially at Christmas. There is a huge cost and risk in holding all this cash. The cash office was manned by two cashiers daily. Card transactions of course are handled automatically, and can't be stolen. In my mind shops should be encouraging card transactions!

I recall for a while the supermarkets were on to a tax dodge, and their receipts would have a message on them about 2.5% being taken to pay the card processing fees - but this would be discounted off your total shop. However the card processing company would be owned by the supermarket, and the fee wouldn't be subject to VAT, so they saved themselves tax. I haven't seen that for a while, not sure if its a loophole that's been closed?

chattychappy

ic wrote: »

I haven't seen that for a while, not sure if its a loophole that's been closed?

Yes, it no longer works. Can't remember if the regs were changed or there was a ruling made based on existing regs.

Stuart_W

reclusive46 wrote: »

Debit cards have never been free, merchants were charged a flat fee. Under a new charging structure though, Debit cards will also be percentage based.

Debit cards - percentage based? Really? So a shop loses money if they offer a cashback service?