Impact of Credit Card Charges Ban

Published / Last Updated on 20/07/2017

Impact of Credit Card Charges Ban.

You have probably already read or heard that from January 2018, businesses will no longer be able to charge for credit and debit charge transactions.  This is UK law following an EU directive.

What many commentators have not talked about is the impact of the same and how this all works.

To be able to take card payments businesses must have a ‘merchant account’  (basically a special credit/debit card ‘bank’ account) where money goes in from sales and the business also pays any transaction fees for each sale or refund (usually a % of the money transaction) as well as usually a monthly account admin fee.  Debit card charge transaction % fees are usually cheaper than credit card transactions because there is an underlying protection when buying with a credit card that if there is a dispute or complaint about the payment, good supplied or service, the card company merchant.

What impact will this have?

  • Some smaller businesses with small volumes of card transactions may stop offering cards as a payment option.
  • Businesses may absorb card charge costs and have lower profits (we suspect many will not do this).
  • Many businesses will simply increase the prices of goods and services (we suspect this is the most likely result).

What then happens?

Prices for goods and services will go up across the board, not just for those who pay by card but also those who pay by bank transfer, cheque or cash.

This will add to the inflation burden i.e. the cost of living is going up meaning less money in our pockets.

In turn, this may mean interest rate rises to curb inflation, meaning your mortgage costs go up.

If goods and services go up, employers will suffer with increased costs for materials (prices up again) and then employee wage increases as people need to earn more (prices go up again).

We expect a lengthy sustained period of inflation, just like we had in the 1980’s.

Explore our Site

About
Advice
Money MOT
T and C