Credit card fees charged by businesses

craoltoir

Are companies justified in charging fees of 2% or more for payments by credit card, claiming that they are charged this amount by the bank?
This is a quote from RTÉ news back in December last year:

A maximum limit is now being set on interchange fees for both debit and credit cards.

For debit cards, the maximum for domestic debit card transactions is to be set at 0.1% of the transaction value, half the current level.

The maximum for domestic credit card transactions is to be set at 0.3% - in line with the Interchange Fee Regulation.

Yggr of Asgard

That the interchange fee, which is the fee the acquiring bank (i.e. the bank the store deals with) kicks back to the issuing bank of your card. That is how your credit card company makes money in addition to charging you if you don't pay it back immediately.

Stores still have to pay large amounts to their merchant banks for the acceptance of card. Contrary to the spin of our politicians those have not been capped.

Their illusion that capping the interchange fee will result in lower cost was nothing else than that, in effect it resulted in several card benefits becoming worse, those card like for example Tesco relying on the interchange fee to provide points to customers have drastically reduced their benefits.

So depending on who the store has the contract with the charge could well be 2% for credit card transactions.

There was once a thought of disallowing charges for usage of credit card, but that has been watered down to be in line with what the actual cost is with no enforcement at all.

Atlantic Dawn

Ryanair charge the fee too if paying by credit card instead of debit.

craoltoir

True. However, supermarkets and department stores don't. Even for a sum as low as €5. Are these businesses absorbing the cost? Are they not also charged by the banks?

Yggr of Asgard

They don't absorb the cost, their prices include the cost of the various payment methods on offer. Cash handling is not cheap either, so the excuse that credit card cost more is often not valid.

You will also see that some shops won't accept credit or debit cards under a certain amount, while that is not against the law it's against Mastercard / Visa rules, so you should complain to them for a shop refusing to accept the cards.

Now the shop however has the right to decline certain types of cards. I.e. even if they take Mastercard they can refuse a commercial mastercard while accepting a consumer mastercard. That is because commercial cards acceptance is higher.

Also if you use NFC payment (be it with card or an app) it's cheaper for the shop too, which is why shops like to accept NFC payment even for higher amounts because most likely they are only charged the NFC fee rather than the traditional charge.