In our blog last week, we commented on the unintended consequences following the impending ban on surcharges for paying by credit card; with HMRC saying that it would no longer accept payments on personal credit cards after 13th January 2018. So far, it seems that HMRC is alone in taking this stance with many companies and government services set to absorb or pass on the cost of processing credit card payments.
The UK government is going further than the EU second Payment Services Directive (PSDII) by banning all surcharges and extending the ban to cover American Express, Paypal and Apple Pay, according to www.moneysavingexpert.com. The PSDII only applies to Visa and Mastercard payments.
This is fantastic news for consumers who have been paying excessive charges for using credit cards. A recent article on the BBC website states: “In 2010 alone consumers spent £473m on such charges, according to estimates by the Treasury.”
Another article on the BBC website states: “British retailers spent some £800m on such charges last year, even though the fees have been previously capped by the EU.”
The surcharge ban will come in to force in January 2018. Because debit cards take money directly from your bank account, they are generally free to use for purchases.
If a company still has to pay the credit card company for processing costs, how will this affect the consumer?
An obvious response would be for companies to pass on the cost by increasing the price of goods and services. Alternatively, they could absorb the costs or stop accepting credit cards altogether. In an increasingly ‘cash free’ society, absorbing the costs or not taking card payment could mean a reduction in sales for smaller businesses that would undoubtedly harm a company’s profits and viability.
Adding the cost to the headline price will give transparency for the consumer and at face value, this would be a good thing. However, this will also mean that people who don’t use credit cards could potentially pay more too. Therefore, the cost of using credit cards could effectively be levied on those that don’t use them.
Whilst this might not seem to be especially significant, it does mean that people who don’t rely on credit could be paying slightly more for goods and services to cover the cost of those using credit cards.
If you don’t use credit cards, how do you feel about the possibility of paying extra for others to use credit cards?
Maybe this question sounds somewhat pointed, but resulting price increases could affect the more mature members of our society who are generally used to saving for the things they want, rather than buying on credit and worry about paying for it later. Of course, it’s not just senior citizens that don’t use credit cards, so any price hikes could affect a wide range of people.
Of course, this ‘have it now’ attitude is a consequence of mass consumerism where we are encouraged to get in to debt to keep the wheels of the economy turning, regardless of whether we can afford it, but that’s a whole other issue.
If businesses decide to absorb the costs of card payments, will there be a change to the minimum spend by card that smaller businesses and pubs especially, have in place?
Potentially, a minimum card spend could become more widespread as smaller businesses try to offset the loss and the current £5 minimum spend limit could increase.
How would this affect you? Would you go to a different pub or shop rather than go to a cashpoint?