Credit Debit Card Fees Cap

Credit Debit Card Fees Cap.

A new discussion document issued by the European Union could benefit millions of British consumers by introducing a cap on transaction fees for debit and credit cards. Fees are normally paid for by shops and firms every time transactions are made at their business.

Retailers think this could ultimately benefit consumers, but banks are arguing people could end up receiving bigger charges to use their debit and credit card. These caps will no doubt go under discussion and plans will involve a cap on fees.

Our View

The issue here is about the law and risk that the retailer and the card merchant takes. 

Retailers that have a merchant account are usually charged monthly fees to have a card merchant account and then a % of the transaction. 

Development of systems, client security and processing the transaction all cost money.

If the purchaser then disputes a transaction they have made by credit card, it must be refunded and then the card merchant has to recover the fee from the retailer involved.  Again, risks for all.

Likewise, we suggest it is a wrong message to promote cheap/free credit cards and free banking.  They all cost money.  If you wish to lower the risk premium then by all means set standard card transaction fees but also ban "free banking" and "free credit cards" when you pay them off each month.