MSE News: EU agrees card charges shake-up, but will shoppers actually pay less?

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The European Parliament has voted to cap debit and credit card transaction fees, but will the savings be passed on? ...

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EU agrees card charges shake-up, but will shoppers actually pay less?




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jobdone1

Eu again, roll on the revolution.

Ectophile

jobdone1 wrote: »

Eu again, roll on the revolution.

Yes, isn't it terrible that the EU wants to stop the banks fleecing retailers with excessive fees. Banks should be over-charging shops as much as they like. After all, it's not as if the customers end up paying the extra costs in higher prices.

Biggles

Ectophile wrote: »

Yes, isn't it terrible that the EU wants to stop the banks fleecing retailers with excessive fees.

To be honest, I'm happy with the open market setting the rates. Retailers can choose whether to offer CCs and will stop if the rates are too high.

andyfromotley

Seems fair enough. Standard and transparent charges, its hard to see a downside to this.

It may have an impact on the cross subsidisation of products, 0% purchase cards being an obvious one, but i doubt there'll be too much impact tbh.

msallen

If the cap is a fixed 0.3% and not variable tied to central bank interest rates, then that's all well and good whilst we have a historically low base rate, but if the base rate were to go back up to just 2 or 3% (and its been MUCH higher in the past) then this would be completely unworkable without CCs charging the consumer interest after only a few days rather than the standard "up to" fifty-odd days as at present.

Much as I disagree with the infantile UKIP-ish sentiment expressed in post #2, I have to agree that this is a bad decision (unless MSE reporting is wrong here and the cap is variable).

SingingDwarf

andyfromotley wrote: »

It may have an impact on the cross subsidisation of products, 0% purchase cards being an obvious one, but i doubt there'll be too much impact tbh.

1% (and higher) cashback/points/other benefits cards will be gone for a start!

The 'reward' current accounts will stop offering cashback on purchases too.

System

Useful analysis

Do you really think Santander is getting anything close to 3% fees on transport spending just now?

Retailers are currently charged in the region of 15p per debit card transaction. Does that cover the 'reward' that these current accounts offer?

SingingDwarf wrote: »

1% (and higher) cashback/points/other benefits cards will be gone for a start!

The 'reward' current accounts will stop offering cashback on purchases too.

andyfromotley

msallen wrote: »

If the cap is a fixed 0.3% and not variable tied to central bank interest rates, then that's all well and good whilst we have a historically low base rate, but if the base rate were to go back up to just 2 or 3% (and its been MUCH higher in the past) then this would be completely unworkable without CCs charging the consumer interest after only a few days rather than the standard "up to" fifty-odd days as at present.

im not sure i agree with this. The charge to retailers is unaffected by interest rates. It should be (and is now about to be forced to be) a charge that reflects the transaction costs between the company and the retailer. The cost of providing credit should be bourne by the borrower, higher interest rates will lead to higher card interest rates. (as it has always done)

andyfromotley

SingingDwarf wrote: »

1% (and higher) cashback/points/other benefits cards will be gone for a start!

The 'reward' current accounts will stop offering cashback on purchases too.

I'm not so sure, card providers will always offer deals in a competitive market, particularly to lure 'attractive customers'. As someone has already pointed out, i doubt the current costs cover these rewards at present so in effect this is already happening.

All this does is limit the amount they can charge retailers. This cost is (usually) not added separately so is paid by all customers even if they are paying in cash. This seems a fairer way. It should, in an efficient market, lead to lower till prices.

CC companies may try to recover this lost income by hiking interest rates but again the market will come to the rescue. If they hike em too high they will lose customers. I predict little overall change, revenues may go down for CC companies.

cse

card providers will always offer deals in a competitive market, particularly to lure 'attractive customers'. As someone has already pointed out, i doubt the current costs cover these rewards at present so in effect this is already happening

The charge for a MasterCard World card is about 1.7%, so card providers can just about afford to offer 1% cashback to people who don't pay any interest or fees. Once the fees are reduced to 0.3%, this type of offer will almost certainly go away. Luring attractive customers is one thing, but losing money hand over fist every time someone uses their card is quite another

Do you really think Santander is getting anything close to 3% fees on transport spending just now?

If you put all of your spending on a Santander card, a lot of it won't earn any cashback at all. On average they're making money

The silver lining is that it doesn't affect Amex cards yet, and maybe there will still be some decent points-based schemes around