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.

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.

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Want to earn more points from credit cards? – April 2024 update

If you are looking to apply for a new credit card, here are our top recommendations based on the current sign-up bonuses.

In February 2022, Barclaycard launched two exciting new Barclaycard Avios Mastercard cards with a bonus of up to 25,000 Avios. You can apply here.

You qualify for the bonus on these cards even if you have a British Airways American Express card:

You can see our full directory of all UK cards which earn airline or hotel points here. Here are the best of the other deals currently available.

Earning miles and points from small business cards

If you are a sole trader or run a small company, you may also want to check out these offers:

SPECIAL OFFER: Until 12th May 2024, the Capital on Tap Business Rewards Visa card is offering a bonus of 30,000 points, convertible into 30,000 Avios. You must have a Limited Company to apply. Click here to learn more and click here to apply.

For a non-American Express option, we also recommend the Barclaycard Select Cashback card for sole traders and small businesses. It is FREE and you receive 1% cashback on your spending.