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Fee cap for paying on credit card

The cost of paying with plastic will be cut throughout the EU after European Parliament members voted overwhelmingly to cap their fees.

The agreement comes following a long-running battle with the main card companies that have a near monopoly and which fought against the controls, arguing they would not have the effect of reducing costs.

The European Commission, which drew up the initial proposals, says the cap on fees will save retailers around €6bn a year while consumers should benefit from savings of around €730m a year. However, the cap will not apply to ATM cash withdrawals.

Dublin MEP Brian Hayes welcomed the vote that will limit fees on debit card payments to 0.2% and 0.3% for credit cards.

“With these new rules we will now have a level-playing field and the market can no longer be dominated by the big card companies.

“New innovative payment methods which can offer cheaper fees and ease-of-use will have the freedom to compete fairly with the major card companies,”, he said.

There are an estimated 760 million cards in the EU, with people using them to pay for 43% of purchases with an average value of €50. The popularity of plastic is rising and in 2013 alone the European Commission says the number of payments rose 6% as people paid bills of €100bn.

This means big profits for the companies, but it eats into the profits of shops and others using them to collect payments. Card companies rates vary widely between countries and from one retailer to another.

Cross-border debit card transactions will be capped at 0.2% of transaction value once the rules become law later this year, ensuring a level playing field for internet purchases.

However, for domestic debit-card transactions EU countries may cap fees at 0.2% of the annual weighted average transaction value of all domestic transactions within the card scheme, while the 0.2% will automatically apply after a five-year transition period.

For smaller domestic debit card transactions member states may also set a maximum fix fee of 0.50 cents per transaction after the five-year transition period.

Credit card fees will be capped at 0.3% of transaction value and member states may set a lower fee cap for domestic credit-card transactions. The rules will not apply to three party card schemes such as Diners and American Express, provided the card is issued and processed in the same scheme. Commercial cards used only to pay business expenses will also be exempt.

Article Source: http://tinyurl.com/kbwqb42


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