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Row over bank card and credit card charges
Mark Bridge
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div#related-article-links p a, div#related-article-links p a:visited { color:#06c; } Banks are making hundreds of millions of pounds a year and pushing up prices on the high street by levying “unjustifiably high” fees on credit and debit card sales, retailers will say today.
New figures from the British Retail Consortium indicate that the average credit card transaction costs retailers 34p, compared with 8½p for a debit card transaction and 2.1p for cash.
The BRC said that card payments accounted for 76.7 per cent of retail spending by value in 2009. It added that its members, which account for about half of all UK retail sales, could pass on savings worth £480 million a year if costs were the same as cash.
Meanwhile, figures from the BRC, the Office for National Statistics and the UK Cards Authority indicate that charges paid by retailers on the average adult’s credit card purchases alone top £185 per adult, per year.
Stephen Robertson, of the BRC, said: “There is no justification for such big differences in charges between cards and cash. With payment technology and efficiency developing, card charges should be going down, not up. In the end, it’s customers who meet unfair costs in the prices they pay.”
Asked whether card companies could produce figures to break down the costs and profits on such transactions, a spokeswoman for the UKCA, said: “The card issuers do not extrapolate that data.”
However, she said that card issuers must cover significant costs, such as the interest-free period on new credit cards and fraud protection systems.
In a further statement, the UKCA said: “Retailers negotiate their fees with their card companies regularly, so the cost of accepting cards is highly competitive and can go up or down. However, we are not aware of any retailer ever passing on cost savings [on transactions] to their customers.”
Transaction fees are broken into two elements. The retailer pays its bank a “merchant service charge” on each card sale. Some of this covers processing costs, but the bulk of the fee goes to a second bank, the card issuer, in an “interchange fee”. The latter is fixed by the issuer and is non-negotiable. According to the UKCA, this is a fixed sum on debit card transactions and a percentage of the sale — at an average of 0.75 per cent — on credit card transactions.
The legality of the fees has been challenged in Europe. A BRC spokesman said: “In 2007, the European Commission prohibited MasterCard from levying its cross border interchange fee, saying it was unlawful. This only applies to payments made across Europe — so, for UK retailers, a French tourist paying in Selfridges would not incur an interchange fee.
“Since then [pending an appeal by MasterCard], the issue has been stuck in the courts and until the MasterCard case is resolved, the UK authorities will not take action.”
The case against the issuers was summed up by Neelie Kroes, the European Competition Commissioner, at the time of the initial MasterCard ruling. She said: “Multilateral interchange fee agreements such as MasterCard’s inflate the cost of card acceptance by retailers. Consumers foot the bill, as they risk paying twice for payment cards: once through annual fees to their bank and a second time through inflated retail prices paid not only by card users, but also by customers paying cash.”
According to the BRC, charges for debit card transactions have almost doubled in five years. The BRC said: “Retailers are seriously concerned that banks plan to make the higher debit card charging regime the norm for emerging contactless and mobile phone payment methods. If that happens, retailers would face huge increases in their costs.”
Credit and debit
• Debit card sales account for 45 per cent of UK retail sales by value.
• Each transaction (whatever the value) costs the retailer an average of 8½p Cashback services cost retailers nothing, as they are tagged on to (fixed-fee) debit transactions Credit card sales account for 21 per cent of sales by value.
Transactions cost retailers a percentage of the sale, averaging 34p. A typical percentage is 0.75 per cent, but rates can be more than double this
Row over bank card and credit card charges - Times Online
Mark Bridge
Recommend?
div#related-article-links p a, div#related-article-links p a:visited { color:#06c; } Banks are making hundreds of millions of pounds a year and pushing up prices on the high street by levying “unjustifiably high” fees on credit and debit card sales, retailers will say today.
New figures from the British Retail Consortium indicate that the average credit card transaction costs retailers 34p, compared with 8½p for a debit card transaction and 2.1p for cash.
The BRC said that card payments accounted for 76.7 per cent of retail spending by value in 2009. It added that its members, which account for about half of all UK retail sales, could pass on savings worth £480 million a year if costs were the same as cash.
Meanwhile, figures from the BRC, the Office for National Statistics and the UK Cards Authority indicate that charges paid by retailers on the average adult’s credit card purchases alone top £185 per adult, per year.
Stephen Robertson, of the BRC, said: “There is no justification for such big differences in charges between cards and cash. With payment technology and efficiency developing, card charges should be going down, not up. In the end, it’s customers who meet unfair costs in the prices they pay.”
Asked whether card companies could produce figures to break down the costs and profits on such transactions, a spokeswoman for the UKCA, said: “The card issuers do not extrapolate that data.”
However, she said that card issuers must cover significant costs, such as the interest-free period on new credit cards and fraud protection systems.
In a further statement, the UKCA said: “Retailers negotiate their fees with their card companies regularly, so the cost of accepting cards is highly competitive and can go up or down. However, we are not aware of any retailer ever passing on cost savings [on transactions] to their customers.”
Transaction fees are broken into two elements. The retailer pays its bank a “merchant service charge” on each card sale. Some of this covers processing costs, but the bulk of the fee goes to a second bank, the card issuer, in an “interchange fee”. The latter is fixed by the issuer and is non-negotiable. According to the UKCA, this is a fixed sum on debit card transactions and a percentage of the sale — at an average of 0.75 per cent — on credit card transactions.
The legality of the fees has been challenged in Europe. A BRC spokesman said: “In 2007, the European Commission prohibited MasterCard from levying its cross border interchange fee, saying it was unlawful. This only applies to payments made across Europe — so, for UK retailers, a French tourist paying in Selfridges would not incur an interchange fee.
“Since then [pending an appeal by MasterCard], the issue has been stuck in the courts and until the MasterCard case is resolved, the UK authorities will not take action.”
The case against the issuers was summed up by Neelie Kroes, the European Competition Commissioner, at the time of the initial MasterCard ruling. She said: “Multilateral interchange fee agreements such as MasterCard’s inflate the cost of card acceptance by retailers. Consumers foot the bill, as they risk paying twice for payment cards: once through annual fees to their bank and a second time through inflated retail prices paid not only by card users, but also by customers paying cash.”
According to the BRC, charges for debit card transactions have almost doubled in five years. The BRC said: “Retailers are seriously concerned that banks plan to make the higher debit card charging regime the norm for emerging contactless and mobile phone payment methods. If that happens, retailers would face huge increases in their costs.”
Credit and debit
• Debit card sales account for 45 per cent of UK retail sales by value.
• Each transaction (whatever the value) costs the retailer an average of 8½p Cashback services cost retailers nothing, as they are tagged on to (fixed-fee) debit transactions Credit card sales account for 21 per cent of sales by value.
Transactions cost retailers a percentage of the sale, averaging 34p. A typical percentage is 0.75 per cent, but rates can be more than double this
Row over bank card and credit card charges - Times Online
