Its time to say goodbye to card surcharges in the UK.
From the 13th January 2018, companies can no longer charge for credit/debit card transactions. Consumers will be delighted with the new changes but how will businesses be impacted?
Companies of all shapes and sizes will be impacted by the new changes, from large airlines like Ryanair to your everyday corner shop.
Card processing can cost large sums and card surcharges allow businesses to recoup the expense directly from the customer. However, in practice, many companies were adding a big premium and making a profit off the charge. You may have seen the 50p charge in the local convenience store or the 2.5% charge for using a credit card to pay online, both charges are more than what the businesses themselves are getting charged. This kind of profiteering has led to the new government ban on card surcharges.
No more card surcharges – But how will businesses react?
Card surcharges amount to 473M in charges to customers in the UK. A wide range of businesses and government organisation will be affected including the HMRC, flight operators, and corner shops. The amount of the surcharge can also vary, a charge on a plane ticket could cost as much as £25 compared with a convenience store who could charge 25p. Different industries will be affected in varying degrees.
But will businesses have to absorb the costs of card processing fees? Or will they simply raise the price of goods and services?
It’s likely that the size of the business will be the biggest factor in assessing how people will deal with surcharging on card processing fees. It’s likely that bigger business-like Ryanair and Thomas Cook will raise their prices to cover their card processing fees, don’t be surprised to see an “admin fee” attached when you booked your next holiday.
Smaller companies are much more likely to absorb the cost of card surcharges. A competitive environment where consumers value even the smallest changes in price leaves some retailers with very little choice. Corner shops and food outlets are amongst those likely to be most affected.
Big changes in the card processing market
The removal of card surcharges is not the only change in the card payments industry in recent years. The UK government has enforced multiple EU laws which in theory, should limit the costs of card processing by lowering the cost of interchange fees. Interchange is one of the major costs within card processing fees. It has been capped at 0.2% for consumer debit and 0.3% for consumer credit in Jan 2016. Which should have led to a big reduction in overall costs. In practice, merchant service providers have not passed on this saving to customers.
Find out more: What’s the best way to choose merchant services?
Although merchant banks are not helping by passing on savings there is a lot that companies can do to help themselves lower card processing costs.
How Can Companies Lower Their Card Processing Fees?
There are many misconceptions around card processing costs and changing merchant service provider. Here are the top 3:
Card processing fees are pretty much the same whichever provider you choose.
Merchant services fees, card machine costs, and online payment fees vary massively between providers. Different providers will be cheaper for businesses operating in different ways.
It’s too much hassle to move to a new merchant service provider.
We know it can take valuable time and effort to fill out paperwork to change providers. But with potential savings running into hundreds and even thousands of pounds is there a more valuable use of your time?
Application forms and underwriting are now much easier, and you could have your card machine installed in as little as 3 days from the point your application is accepted.
It’s too hard to compare different providers and get a transparent view on savings
There is a lot of information on the web about merchant service providers but very little on transaction costs. There is a multitude of lead generation companies online who simply sell your details to various providers, perfect if you have a few hours to spend discussing pricing with up to 10 different merchant service providers.
If not, you can use our price comparison tool, which compares up to 15 of the leading providers in the UK. All prices are shown online, and you can choose which provider you want to speak too.
Compare your card processing costs here