Date posted: 22nd January 2018
KJM and credit card charges
New rules that came into effect on 13 January 2018 mean you cannot be penalised for choosing to pay by card, either online or in-store. Under the old rules introduced a few years ago, companies should have only charged you what it costs them to process a debit or credit card payment - they shouldn't have made a profit on these surcharges.
The new rules stem from the EU Payment Services Directive, which lays out the changes across the EU. This means the new rules will be put into UK law - so will continue to exist even after Brexit.
Stephen Barclay, the Economic Secretary to the Treasury, said: "Rip-off charges have no place in a modern Britain and that’s why card charging in Britain is about to come to an end."
He continued "This is about fairness and transparency, and so from next year there will be no more nasty surprises for people at the check-out just for using a card. These small charges can really add up and this change will mean shoppers across the country have that bit of extra cash to spend on the things that matter to them."
That was the politicians view on what was happening, now here is my view using KJM Windows and Conservatories as an example. If you did not know credit companies and the terminal providers charge companies to accept credit cards and even debit cards. We have to pay for the terminal and then we are charged percentage fees for the transaction value.
In our case we are charged 0.295% to accept a debit card along with a small authorisation fee (around 5p). To accept Mastercard and Visa consumer credits cards the fee raises sharply to 1.115%, corporate cards are even higher at 1.855%. American Express charges were totally prohibitive. So in the past we accepted all payments and charged the amount we were charged by credit card companies.
Now I might here you say that’s not a huge figure. The trouble is the consumer likes to use cards that provide a loyalty bonus. This can be in the form of cash back, air miles, points etc, so if they are making a high value purchase, these rewards can be large. Let’s put it in another way, if our entire £4 million turnover was paid on a consumer credit card then it would cost my company around £45,000 per year, if it was paid using corporate credit cards then it would be £74,000. These are considerable figures and not ones that can be totally ignored.
So as a company we have two choices, immediately add 1.1% to our prices and accept consumer credit cards. If we do so, we are penalising those that pay by debit cards, cheques and BACS and could be accused of “ripping off the consumer” for adding a charge they should not pay. It also means as a company we are adding to inflation figures. My main point here is the legislation was implemented so the consumer was "not being ripped off"
Our second choice would be not to accept credit cards, so we are not adding an across the board increase to all of our prices, in what is already a very competitive market. This I believe is the fairest way for all concerned. It was reported in The Mail that even the HMRC has said it is stopping accepting credit cards because it cannot afford to pay the fees without charging for them. Other large bodies could follow.