2.5% charge for using cards, but don't worry

MSE_Martin

STORES CHARGING 2.5% TO USE CREDIT CARD? Don’t worry it’s just a tax thing.  

I've been asked a lot recently about signs in high street stores saying they’ll charge for credit & debit card usage e.g. such as Debenhams.  

Actually this is just a clever ruse for them to cut their tax, they charge you 2.5% for using the card, but give you a 2.5% reduction, so the price you actually pay is unaffected.  

The transaction fee goes to a separate company and all of this means they pay less tax.  So in most cases don’t worry, it has no impact on the price you pay at all.

To discuss this click reply

King_David_2

Swings and roundabouts.

Companies pay less tax, the government has less to give to councils. Councils have less so they charge individuals sky high council tax.

Yet if companies paid the tax our clothes, food etc would cost even more so either way they've got us.

Britain - one scam of a country to live in!

Robert_Sterling_3

This has been recognised as a legal tax avoidence scheme which like the "Evenden" inheritance tax avoidance scheme make be kicked out of touch by new legislation.

johnllew

Large retailers are avoiding millions of ££ through this scheme. You can read about the court case HERE.

Robert_Sterling_3

Are they guilty of overcharging customers who pay cash who also have the 2.5% charge.

Galstonian

Are they guilty of overcharging customers who pay cash who also have the 2.5% charge.

Not as far as I am aware. The charges are only apportioned when you choose to pay by CC and I have never heard of any retailer who uses this technique adding 2.5% to cash customers bills.

Galstonian

But if you go to a wholesalers or trade supplier this will not be the case. If you are going to a supermarket or similar sized store for business purchases then I'd suggest only doing so for convenience or when you will save enough to cover the additional cost.

Finishrich

Good point. I was thinking High Street, as my boss recently got things for the business garden from B&Q. But your right in general you would use a wholesaler, and they don't use this tax avoidance scheme, at least at the moment.

But paying for petrol with a credit card could be an issue for some.

MarkyMarkD

Not as far as I am aware.  The charges are only apportioned when you choose to pay by CC and I have never heard of any retailer who uses this technique adding 2.5% to cash customers bills.  

I think that Gal is missing that RS is making a rather subtle, but clever, point.

If the shops can con the tax-man that the actual cost of the goods is 97.5p in the £, and that the other 2.5p is the cost of processing card payments, they should rightfully be charging cash customers 97.5p in the £ as they are not incurring the card processing cost.

And Martin is, IMHO, absolutely right that businesses will get stuffed by this VAT saving scam as the input VAT recoverable will fall as part of the cost is VAT-exempt bank charges.

Shinds

If you sometimes look on ur receipt, you should be able to read a little section at the bottom about this 2.5% thing

pin

Article in the Times today about this very thing:

http://business.timesonline.co.uk/article/0,,8209-1334703,00.html