Card Surcharges banned from Jan 18

[jonby]

The Moose said:

jonby said:

Yet another good idea on paper that once you look at the practicalities, will leave consumers worse off and therefore, achieve the opposite of the original intention

The issue is primarily a concern for lower margin businesses. At risk of stating the obvious, if you are an upmarket clothes retailer, selling at three times cost, the 1-2% taking a credit card costs you in merchant fees represents perhaps 3% of your gross margin. If you are say a travel agent working on a 5-10% margin, that merchant fee will cost you perhaps 20-40% of gross margin

For those who work in low margin businesses, the difference between charging a surcharge for taking credit cards and not charging can quite literally be the difference between making a profit and a loss, even for a well run, lean company. However frustrating it understandably is for consumers, those really are the cold hard facts

One part of my firm is an auction house. We charge nil surcharge for debit cards (we get charged less than £1 per transaction, our average transaction level is very high for a credit card taking merchant at c. £500 and we figure it would cost more in admin to implement if we tried imposing a surcharge). On credit cards, we charge buyers a surcharge. Buyers also have the option of paying with cash or bank transfer.

On credit cards we are charged between a little over 1% and a little under 2%, depending on the card type - commercial/business/charge/international cards cost us near the higher end of that scale and our customer base is such that we take a higher proportion of such cards than a typical merchant

As I see it, we are giving buyers a great option to use their credit card (it's relatively rare amongst auction houses) but it carries a huge cost to us (as a percentage of our margin) and therefore, we have to pass on the cost. Taking bank transfers costs us nothing, taking cash costs us 0.25%, taking debit cards costs us typically 0.2% (based on a £500 av transaction) and as referred to above, taking credit cards costs us between 1 & 2%

So with the new rules, we will either stop taking credit cards, or up our buyers premium to everyone by 2%. There are absolutely no winners here apart from the card companies who will take more money thru credit cards, as when consumers face no financial penalty for using them, their use will surely become far more prevalent - we are assuming credit card usage will as a bare minimum double once there is no penalty for consumers to use them

The card companies must be rubbing their hands with glee as the EU is giving them a monster boost in card usage & ultimately, their profits

Edited by jonby on Thursday 20th July 14:46

Rememeber you don't have to accept credit cards at all - I am pretty sure you can just decline to accept them.

Of course we can. We could also continue to accept bankers drafts but we aren't living in the dark ages. We want to offer our customers the choice they would expect, but we can't do it if quite literally, it means we lose money. So we want to give our customers a clear choice, with a surcharge should they choose the option which is most expensive for us to implement

Who wins if we stop offering credit card as a form of payment ? (hint, nobody - literally, everyone loses)

[Some Gump]

Is the logical outcome of this not more daft high merchant fee credit cards with cashback / reward crap for the punter?
If the seller can't legally differentiate between a .5% fee and a 2% fee, why would any card issuer not just aim for 2%?

[deggles]

The current legislation is absolutely fine, it's fair and limits surcharges to the direct costs incurred by a seller.

Is anyone else concerned by the language/tone of this announcement: https://www.gov.uk/government/news/rip-off-card-ch... . "Rip off card charges" - sounds like HM Treasury is employing out-of-work Daily Mail journos

[jonby]

deggles said:

The current legislation is absolutely fine, it's fair and limits surcharges to the direct costs incurred by a seller.

This is a really important point, though not that widely known and as far as I can tell, not particularly well policed

If it was, it would address the most severe instances of those merchants who do take advantage of consumers

[ambuletz]

as a consumer the only time I have ever had to pay extra to use my debit card is if I bought something from the local off license or takeaway. The chance that i do this is extremely rare anyway as the cash machine in the off license has free withdrawls.

[The Moose]

jonby said:

The Moose said:

jonby said:

Yet another good idea on paper that once you look at the practicalities, will leave consumers worse off and therefore, achieve the opposite of the original intention

The issue is primarily a concern for lower margin businesses. At risk of stating the obvious, if you are an upmarket clothes retailer, selling at three times cost, the 1-2% taking a credit card costs you in merchant fees represents perhaps 3% of your gross margin. If you are say a travel agent working on a 5-10% margin, that merchant fee will cost you perhaps 20-40% of gross margin

For those who work in low margin businesses, the difference between charging a surcharge for taking credit cards and not charging can quite literally be the difference between making a profit and a loss, even for a well run, lean company. However frustrating it understandably is for consumers, those really are the cold hard facts

One part of my firm is an auction house. We charge nil surcharge for debit cards (we get charged less than £1 per transaction, our average transaction level is very high for a credit card taking merchant at c. £500 and we figure it would cost more in admin to implement if we tried imposing a surcharge). On credit cards, we charge buyers a surcharge. Buyers also have the option of paying with cash or bank transfer.

On credit cards we are charged between a little over 1% and a little under 2%, depending on the card type - commercial/business/charge/international cards cost us near the higher end of that scale and our customer base is such that we take a higher proportion of such cards than a typical merchant

As I see it, we are giving buyers a great option to use their credit card (it's relatively rare amongst auction houses) but it carries a huge cost to us (as a percentage of our margin) and therefore, we have to pass on the cost. Taking bank transfers costs us nothing, taking cash costs us 0.25%, taking debit cards costs us typically 0.2% (based on a £500 av transaction) and as referred to above, taking credit cards costs us between 1 & 2%

So with the new rules, we will either stop taking credit cards, or up our buyers premium to everyone by 2%. There are absolutely no winners here apart from the card companies who will take more money thru credit cards, as when consumers face no financial penalty for using them, their use will surely become far more prevalent - we are assuming credit card usage will as a bare minimum double once there is no penalty for consumers to use them

The card companies must be rubbing their hands with glee as the EU is giving them a monster boost in card usage & ultimately, their profits

Edited by jonby on Thursday 20th July 14:46

Rememeber you don't have to accept credit cards at all - I am pretty sure you can just decline to accept them.

Of course we can. We could also continue to accept bankers drafts but we aren't living in the dark ages. We want to offer our customers the choice they would expect, but we can't do it if quite literally, it means we lose money. So we want to give our customers a clear choice, with a surcharge should they choose the option which is most expensive for us to implement

Who wins if we stop offering credit card as a form of payment ? (hint, nobody - literally, everyone loses)

What is it you auction out of interest?

[JimmyConwayNW]

Running a car sales business we may look to introduce an admin fee to cover these charges and agree to waive the admin fee if the customer pays with bank transfer. No charge for deposits under £500 on any form of card.

May completely look to avoid taking credit cards.

[red_slr]

I think we will have to just put prices up. I cant think of any other simple way of doing it.

The £1 per transaction on all cards was perfect as covered the cost of running the terminals and card fees etc and customers did not feel ripped off as it was only a pound.

[ymwoods]

I own some shops and don't have a minimum transaction limit like some other small retailers but I do charge if someone just wants lottery, scratchcards or Paypoint with no other items on as the margin is so low on them that I end up out of pocket if they pay with CC.

If I can no longer charge more then I will have to point them to use the cash point, which is free. However, some customers for whatever reason don't like/don't want to use cashpoints so, at that point, I would rather lose the sale than make a loss. Especially in the case of things such as the PayPoint where the margin is so low, yet the turnover so high.

[jonby]

The Moose said:

What is it you auction out of interest?

Apologies, not been back to this thread for a while

We act as agent to Insolvency Practitioners (in their capacity as administrator or liquidator) and finance companies, so our area of speciality is in why the asset is there rather than what the asset is - we sell quite literally, anything other than property (we do sometimes sell properties and occupational leases, but not usually by auction)

So Plant, vehicles, stock - we sold the original Pink Panther car a few years ago which had some publicity on here

[HTP99]

JimmyConwayNW said:

Running a car sales business we may look to introduce an admin fee to cover these charges and agree to waive the admin fee if the customer pays with bank transfer. No charge for deposits under £500 on any form of card.

May completely look to avoid taking credit cards.

Anything under £1000 we will take on a credit card with no fee, anything over we charge 2%.

We've recently tried to discourage debit card payments for large transactions; "cash" purchase of a car or a large finance deposit, for example as our debit card charges last year were £19k. We now suggest a bank transfer of the funds and to be honest it is far easier and the majority of customers are happy to use that facility.

I actually wasn't aware that there were charges for taking a debit card, it's not in the same scale as a credit card, however it all mounts up.