A new EU law will limit the inter-bank fees on the basis of which banks charge retailers for accepting card payments. The cap will be 0.2 per cent of the transaction value for debit cards and 0.3 per cent for credit cards and will apply to all card purchases in the EU – including online. National Ministers and MEPs agreed last month on a European Commission proposal, and the new rules are due to be introduced by the end of the year provided final formalities are completed.
Of course, the higher the transaction fees, the more likely retailers will need to pass them on to all consumers in the form of higher prices. So the cap aims to keep a lid on prices, for everybody who uses credit cards but also for consumers who use (cheaper) debit cards or cash but still need to pay shop prices which reflect the level of the fees for more expensive credit cards. The cap prevents consumers paying with low or no fee cards having to subsidise the bonuses and air miles that are offered to cardholders paying with high fee cards.
The cap will also particularly help smaller retail businesses who find it especially hard to afford high fees.
The Commission estimates that the rules when implemented could lead to a reduction of about £4.5bn (EUR 6bn) annually in hidden fees for consumer cards.
Yes, this new law might prevent some card providers and banks from making excessive profits. And some might conceivably decide to scale back bonus programmes which tend to benefit most those who can offer the most expensive cards, rather than helping all shoppers.
But it is hardly balanced reporting for Daily Mail and The Times (paywall) to claim that “Millions of Britons could lose credit card perks such as cash bonuses and air miles because of EU legislation” without reminding readers why the cap was introduced: to give all High Street and online customers better value for money.
Neither do they mention that the new EU law aims to encourage providers to become more competitive and innovative to offer retailers and consumers a better deal all round, including through new technology.
Card companies remain perfectly free to offer air miles and other freebies if they believe that is the best business model and some customers might appreciate that. But it is clear that not everybody does.
One Mail Online reader commented: “They were making so much money they could offer all these perks, and who was paying in the long run? Anyone who imagines the perks were free is deluded.”
It is not for the European Commission to endorse or oppose that particular comment. But it does show that the media reports today did not cover all sides of the argument.