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

redux

Seeing as someone's brought this thread back, we can reflect on the effects as seen after a few months.

Most of the credit cards that used to offer 0.5 to 4% cashback on spending have ceased doing so.

phillw

redux wrote: »

Seeing as someone's brought this thread back, we can reflect on the effects as seen after a few months.

Most of the credit cards that used to offer 0.5 to 4% cashback on spending have ceased doing so.

Yes I received the AA letter yesterday, which is why I'm a bit ranty. No more 3% off the price of fuel.

Hopefully my local garage will start taking contactless payments soon and I can use a TSB card for 5%.

JoseChungsDoomsday

Nothing beats a bit of doom and gloom on a sunday morning..

All this talk of cash back credit cards etc stopping is rubbish. America has very low transaction fees and almost every credit card on the market has some kind of rewards system. Why? Because the customers want it.

Not trying to blow anyone's mind, but here is the science behind it -

• Lower fees means more businesses will want card terminals etc
• the more widely accepted cards are the more likely people are to have one in their wallet
• More card transactions = more revenue
• More cards on the market = more demand for different products (rewards/cashback etc)

Frankly the whole 'EU has made a rule so it's bad' and the 'open market can govern itself better' is nonsense. The EU has made this decision because the open market wasn't playing fair, banks were overcharging and customers were suffering because of it.


Just remember, cashback/reward cards will stay as long as we make it clear we want them. Your credit card company stops cashback on your card? Move to one that still offers it (once they see their numbers grow they wouldn't dare stop it).


But nah, lets just all jump on the hate train and enjoy some EU bashing :money:

Smileyguy6

A couple of points:

Firstly, the figures quoted in the article that are charged for transactions are way too low. In reality every debit card was costing between 28 and 50p per transaction and credit cards anywhere between 1.35% and 1.95% to process. Some very large retailers may have lower rates but not as low as quoted in the article.

Secondly, the cap is not yet in place and as a result the big players in the card processing game have started charging an interchange fee on debit cards of 0.4% or 0.5%. Now, this may not sound a lot, however, if the retailer is in an industry has a low profit margin they simply cannot afford to take a debit card without charging the customer. Therefore, BE PREPARED for a period when you will be charged for using your debit card and as highlighted above you will see Cashback and possibly other facilities disappearing from your debit card.

Hopefully, in the long run it will become cheaper and easier to use your card, but I am not convinced that the benefits will be as intended. The question is when does the cap come into place for the charges?

zagfles

Smileyguy6 wrote: »

A couple of points:

Firstly, the figures quoted in the article that are charged for transactions are way too low. In reality every debit card was costing between 28 and 50p per transaction and credit cards anywhere between 1.35% and 1.95% to process. Some very large retailers may have lower rates but not as low as quoted in the article.

Secondly, the cap is not yet in place and as a result the big players in the card processing game have started charging an interchange fee on debit cards of 0.4% or 0.5%. Now, this may not sound a lot, however, if the retailer is in an industry has a low profit margin they simply cannot afford to take a debit card without charging the customer. Therefore, BE PREPARED for a period when you will be charged for using your debit card and as highlighted above you will see Cashback and possibly other facilities disappearing from your debit card.

Hopefully, in the long run it will become cheaper and easier to use your card, but I am not convinced that the benefits will be as intended. The question is when does the cap come into place for the charges?

9th December by the looks of it

https://www.gov.uk/government/news/credit-and-debit-card-fees-to-be-capped

zagfles

JoseChungsDoomsday wrote: »

Nothing beats a bit of doom and gloom on a sunday morning..

All this talk of cash back credit cards etc stopping is rubbish. America has very low transaction fees and almost every credit card on the market has some kind of rewards system. Why? Because the customers want it.

Not trying to blow anyone's mind, but here is the science behind it -

• Lower fees means more businesses will want card terminals etc
• the more widely accepted cards are the more likely people are to have one in their wallet
• More card transactions = more revenue
• More cards on the market = more demand for different products (rewards/cashback etc)

Frankly the whole 'EU has made a rule so it's bad' and the 'open market can govern itself better' is nonsense. The EU has made this decision because the open market wasn't playing fair, banks were overcharging and customers were suffering because of it.


Just remember, cashback/reward cards will stay as long as we make it clear we want them. Your credit card company stops cashback on your card? Move to one that still offers it (once they see their numbers grow they wouldn't dare stop it).


But nah, lets just all jump on the hate train and enjoy some EU bashing :money:

Maybe you can explain the maths behind it then.

Bank only get 0.3% on CC transactions. Out of that they need to pay:

• The card scheme (VISA/Mastercard)
• Section 75 claims - where retailer goes bust/doesn't deliver - the bank is liable
• Interest free period of generally 25-56 days for the majority of card holders who pay in full every month

Do you really think they'll still pay 0.5% or 1% cashback, as you can get now, when they only make 0.3% minus the above costs?

I've not included credit risk of customer at that could be addressed through card interest rates.

This could lead to banks not offering any interest free period for CC purchases, or reducing the interest free period. Why would they be interested in those who pay in full anymore (they are the majority of CC users - contrary to popular belief).

bigadaj

Surely this is going to go the way of current accounts.

So those with a good credit record will be able to get decent cashback but only on a limited sum. This provides a good basis to buy in customers and potentially sell added value services.

The connection between the fee earned and the amount paid out isn't fixed, if so why is there the scramble to pay people multiples of the boe base rate to people with current accounts?

WHITEFRIAR

Evening all i hope somebody here can explain what is going on with these changes in charges. I am a small trader and we have had notice of new charges this week from our current terminal provider. We have also checked the market and as of 1st December 2015 they will all be VERY similar.
The figures below are approx but accurate to allow you to get the gist of the problem.
Charges we pay now:
Debit Cards = 21p
Credit Cards (most apart from Amex which we don't accept) = 1.4%
£15 per month terminal fees
£20 per month minimum transactions
£4/month fee for compliance.

Charges from 1st December
Debit Cards = 0.45%
Credit Cards (except Amex) = 0.6%
Other fees stay the same.

These % are not as per EU directive and as i now understand the ruling these 0.2 and 0.3% are just interchange fees and not the fees charged to the retailer.
How are they allowed to charge our small business the above % after the ruling?

Most of our transactions are between £1,000 and £5,000 so doing the maths as above focussing on debit cards:
£1,000 transaction we will pay £4.50 to process compared to 0.21p now!
Credit Cards are less than before which is great but we charged the 1.4% to the customer so this doesn't affect our bottom line.
But we will now have to charge for DEBIT CARDS! and i will have to explain this to the customers.
I fear a riot!
The card companies have been forced to reduce credit card fees but will hammer debit card fees especially for high value transactions.
Comments, advice welcome and would like to hear if other business owners have noticed this and are in the same position.

Fleet_gate_glass

Hello there, we are a small business and with the new charges 'coming in to force' today, we are still paying the same as always. I rang our supplier (worldpay), only to be told that is there fees, not ours, and basically said I was already on a good rate (1.2% and 21p), so wouldn't review them.


So in no way are these savings being passes on, and like yourself, come March, we will be switching to a 0.4% fee on debit cards (this will represent a very large increase in fees)


So it just feels like they have got this one totally wrong, and definitely as far as our fees are concerned, all we've had is an increase.


The other slight problem is that we charge 50p on any transaction under £5 paid by card, and customers are complaining because they think we pay these new low fees. They word it as 'a retailer will pay a maximum of', but in truth, there are no savings to be had, only the middle man will be getting richer (the one I'm led to believe this new regulation was supposed to target?)

GaryJS1

I think the press have got the wrong end of the stick. The idea sounds good but in reality the merchants have increased all the other fees and most small retailers are having to pay more in charges. So in reality the retailers have no choice to charge customers more for using debit cards not less as the press and government seem to think. This really does need looking into as small retailers are going to look bad now as there are no savings to be passed onto customers.