Credit Card Charge Ban Means More Inflation

Credit Card Charge Ban Means More Inflation.

With effect from midnight tonight businesses and services will no longer be allowed to make additional charges if you pay for goods and services by card or online payment services such as PayPal.

Charges for Cards

It is understandable that card merchant account suppliers charge businesses because it is they that usually build the secure systems to ensure your card payment is secure.  By way of example, financialadvice.net’s own card ‘merchant’ account supplier charges us £15pm for the account and then for each transaction 2.95% + 13p of the amount paid to us.  For PayPal, we are charged 3.4% plus 20p of each amount paid to us.

For example, you buy a service from us, say for £100.  Using your card, we would be charged £2.95 + 13p (£3.08) by the card merchant or if you pay via PayPal, a charge of £3.40 + 20p (£3.60).  We are also charged for refunds.

Inflation

For large businesses with high volumes of transactions, their charges will be lower due to volume and most have already absorbed these costs and factored them into their overall pricing.

For smaller businesses that perhaps do not have the volume of transactions by card to secure lower fees and/or did (until tonight) pass on their charges to clients, the ban on passing this charge on may mean around a 3% loss.

We suspect that this will drive prices up even further meaning more inflation.