Good news or bad news? Government bans credit card acceptance fees from January

In a surprise announcement, the Government has decided to ban credit card acceptance fees from 13th January 2018.  This is the next move after the EU cap on interchange fees – if retailers are meant to be paying no more than 0.3% to accept standard Visa and MasterCard products, the Government must think that they can afford to absorb the fee altogether.

From the viewpoint of HFP readers, this will mean the end of credit card fees when booking flights.  (Of course, the BA fee has always been voluntary for those in the know …..)

More importantly, though, you may be excited by the additional possibilities for running up credit card spend to earn more miles and points.

After all, no-one will be charging after 13th January so surely life will be better?

Real life isn’t that simple, of course.

As retailers who read HFP always point out in our comments section, fees for shops have not come down to 0.3% for anyone not called Tesco.   This is because charges to retailers include the rental of payment terminals and various other services which lead to a far higher overall fee.

On the other hand, as a reader pointed out yesterday, he is charged 0.6% by his bank for depositing CASH.  Given that it also needs staff time to count and sort it, he would be happier if all his customers used cards.

This ban will disproportionately impact the acceptance of American Express, since Gold and Platinum cards are not impacted by the interchange fee cap.  Stores will also be hit hard if they accept business, ‘premium’ (eg World Elite) or foreign Visa and MasterCard products.

Whether this decision turns out to be a ‘win’ for American Express, or card acceptance in general, remains to be seen.

HMRC logo

Don’t get carried away by the potential for HMRC acceptance ….

I had a few emails yesterday from readers who were delighted that they would be able to pay their income tax, PAYE, VAT etc for free with their credit card from next January.

These people are living in fairy land.

At the moment, HMRC charges you – almost exactly – the interchange fees levied by Visa or MasterCard.  These are:

VISA Personal Credit Card 0.415%
MasterCard Personal Credit Card 0.386%
MasterCard World Premium Credit Card 0.374%
MasterCard Signia Premium Credit Card 0.606%
MasterCard Elite Premium Credit Card 0.606%

VISA Business Credit Card 1.508%
VISA Corporate Credit Card 1.744%
VISA Purchasing Credit Card 1.755%
MasterCard Business Credit Card 1.973%
MasterCard Corporate Credit Card 2.248%
MasterCard Purchasing Credit Card 2.406%
MasterCard Fleet Credit Card 2.134%

Anyone who thinks that HMRC is going to absorb a credit card charge of as much as 2.406% is dreaming.  It is more likely that the Revenue stops accepting credit cards.

Even at 0.386% it would be a noticeable hit to tax revenue if every small business, sole trader or individual with additional non-PAYE income started to use a card.

The only reason it may continue is that …. well …. it’s the Government we’re talking about here.

Speaking personally, though, I think I will be paying my January 2018 tax bill BEFORE 13th January (for a 0.38% credit card fee) rather than gambling that the facility will still be available after that.

(Want to earn more miles and points from credit cards?  Click here to visit our dedicated airline and hotel travel credit cards page or use the ‘Credit Cards Update’ link in the menu bar at the top of the page.)

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Comments

  1. James A says:

    I’ve always been pissed off that companies charge me a “credit card” fee when I use my Amex Platinum “charge card”. Why has this never been successfully challenged on a legal basis?

    • Probably because it’s fairly obvious they could just rename it a ‘credit or charge card fee’.

    • Andrew (@andrewseftel) says:

      Probably small size of fees meaning it’s not worth the effort. Tragedy of the commons. Nothing stopping you yourself from challenging it in small claims.

    • Interestingly it appears section 75 does not apply to charge cards, which must mean they are not classified as credit cards and so I think technically you have a point.

      Everyone who got charged a credit card fee for paying with a charge card might be entitled to a refund!

      • Genghis says:

        But IIRC Amex have their own voluntary scheme on equal terms?

        • They do but you might be into a winner in court if you could show that charge cards are not credit cards by the fact the law treats them differently.

          It’s arguing over semantics for sure but legal people love that kind of thing.

    • Klaus-Peter Dudas says:

      At least my Platinum and Gold charge cards both say CREDIT on the back in the top right hand corner… 😉

  2. its good news imo.

    Accepting credit cards is part of doing business.
    Fees or surcharges should not be passed on to the consumer.
    Its a choice the business has taken to accept plastic. Now would they rather have the business from taking plastic or not?
    I am sure these expense of taking plastic ends up in the annual accounts somewhere anyway.

  3. Memesweeper says:

    I don’t expect HMRC card payment options to disappear as they are linked to the actual charge. Also HMRC are not selling you anything nor providing a service, so no doubt the regulations will not apply to them.

    AFAIK there is nothing to stop a discount for cash (or debt card) at the checkout. Just as long as the fees are bundled into the up-front price.

    • RussellH says:

      I recently noticed a number of ‘gas stations’ in the USA with dual pricing – a lower cash price and a higher credit card price. Then others charged a fee for debit cards, but not cash or credit cards.

      • the_real_a says:

        The US market is dysfunctional. Advertised Price + State Tax + Card Fees + Tips = Actual price of goods/service

        • I bought an $8 can of beer in NY the other week and it ended up at $11ish. Sales tax, then card machine insisted I pick a tip from the options of 15 / 20 / 25%. This was for reaching into a fridge and passing me the can.

        • Haha at first I misread that as a vending machine asking for a tip and sadly wasn’t surprised 😀

          Tipping culture in US is bonkers – a even $1/beer the bar staff are making way way more than minimum wage in an evening, even before accounting for their wage! I also remember SuperShuttle website asking me what tip (15-25%) I wished to give *in advance of the ride*! So tip before having the service – thankfully gave nothing given it was a dreadful driver with a broken windscreen!

        • RussellH says:

          Motor fuel in the USA seems to be the one area where stuff is advertised at an all inclusive price as here in Europe.The price you see is really what you pay.

    • Mr Dee says:

      Agree!

  4. Personally I regard the price of the energy to be more important than which card they accept, although British Gas are usually expensive.

    • Genghis says:

      I’d always go with the cheapest one but many of them accept Paypoint payments if you request a card. I did the BG MSE collective switch last year and I pay at Co Op Paypoint using Amex.

      • Yes we prepaid our SSE every couple of months with Amex at co op…then it jumped on renewal. Now have to pay AFFECT by dd. V g deal tho. They say they don’t do PP but l must ask them again.
        Just my darn council tax cannot get a PP or PO card.
        When our insurance company decided to slap a 2.5% fee l challenged them, and they refunded it. Said they were unaware of any eu fee changes! Unlikely…

      • Nick M says:

        I did the same, but currently just have a small DD set up rather than a PayPoint card. You can make adhoc top-ups via Visa/Mastercard in the app though; this was handy when Sainsburys including the prepaid Visa cards in a 15% off promotion

      • With Santander cashback I can’t justify using credit cards for utilities or telecoms bills.

        • Alex W says:

          But you feel obliged in order to offset the £5 monthly fee. I am considering ditching the 123 account as at 1.5% interest it’s just not very attractive any more.

        • Alex W says:

          Just checked. I have 5 direct debits coming out, and am only getting just over £4 in cashback. So not even enough to cover the £5 fee.

        • Agreed, although with already having Nationwide & Tesco accounts on the go, not many other options for >1% interest.

        • Genghis says:

          For me it’s the fact that the alternative is Lloyds with up to £5k. We need to keep a lot more than that in a current account

        • Ahh OK – I still use RBS as my main current a/c (2% on all bills, the phone/broadband/mobile ones go to Santader for 3%). For interest considering moving more to Zopa.

  5. This move is not a surprise – it is part of the EU PSD2 regulation, which member states are required to bring into national law. The rule in PSD2 is that surcharging cannot be applied to consumer EU issued cards after January 13th 2017 – this is merely the UK government announcing this will be brought into UK law, as required in any case.

    Note that nothing stops a website or store raising their prices. Nothing stops a company putting the card fee into a so called booking fee, they just can’t call it a card fee explicitly anymore.

  6. RussellH says:

    > Stores will also be hit hard if they accept business, ‘premium’ (eg World Elite) or foreign Visa
    > and MasterCard products.

    In my experience all personal Visa and standard (ie not ‘World’ etc) Mastercards were charged at exactly the same rate, whether UK, EU, or rest of the world.

    It was foreign DEBIT cards that I got stung for at 2.6%. It only happened once, thank goodness, when an Australian customer used a Debit MasterCard. It would have been the same for EU debit cards!

  7. bigpapc says:

    OT: I can’t seem to see any AA flights on BAEC to book with avios, on any route, for any dates. Is this just me? Or was there some change to the system that I missed?

  8. What the government says and what the government does is not necessarily the same thing.

  9. “Of course, the BA fee has always been voluntary for those in the know ….”

    I’m not ‘in the know” .. please can you enlighten me?

    Thanks

  10. OT but if anyone interested the new Victory House Hotel MGallery by Sofitel in London Leicester Square has a special opening rate for Gold and Platinum Le Club members of £98 per night from 10 Aug to 31 Aug.

    • …… for a room the size of my bathroom. Looked at it, rejected. Far better value in London even at £99 for a room where you can lie in bed and touch both walls ….

  11. Jean Paul says:

    Is there any card currently accepting new customers that beats the Tesco bank debit card for paying HMRC? Tesco bank debit card pays 0.3 avios per £1 and there’s no fee to use.

    I know some legacy products offer far superior rewards, even after the fee. But is there anything much better than the tesco card that is open to newbies?

    • Depends how you play the maths. Virgin Black is 1 per £1, fat fee but arguably sign up bonus negates it in year 1.

      It is tricky to beat and could be a HMRC fall back if they drop credit cards.

      • If you use the Tesco debit card to pay off a credit card bill, does that trigger 0.3/£ or is it non qualifying spend ?

        • Counts as finance transaction with no earnings in my experience (tried it with Amex and Hilton Visa)

    • Alex W says:

      IHG Premium is better. 0.374% fee and 2 points per £. Which based on yesterday’s discussion are worth AT LEAST 0.88p compared to buying them and worth about 1.1p when redeeming them. So I make that at least a 0.506% return.
      That’s not including the free night at £10k spend. Worth around £250, minus £99 fee = about another 1.5% back on your spend. So total 2% return using IHG premium to pay HMRC.

  12. RIcatti says:

    This behaviour of British Gas as THE LENDER is questionable.

    In addition to the extortionary £40 fee, they are probably leaving Late Payment mark on your credit file. The consequences are serious.

    I would switch from such provider IMMEDIATELY.

  13. Linking your amex to your paypal account and then paying via paypal gets rid of credit card fees on some websites. (This works on thetrainline.com for example)

  14. Lewis Watson says:

    Just wonder will it affect Amex as they are not credit cards?

    • guesswho2000 says:

      Yes it will, it’ll apply to all card payments, and some (maybe most?) Amex’s are credit cards, it’s only the Green/Gold/Platinum/Centurion charge cards which aren’t.

      In the same way that it’s possible to get Visa’s which aren’t credit cards (cba to look and confirm, but I think Handelsbanken issues a Visa charge card in the UK, or at least did at some point, and Barclaycard a business charge card).