This is why Amazon won’t accept Visa credit cards from January

If you have an Amazon account in the UK, it is very likely that you received an email from the company today saying that it will not accept Visa credit cards from January 2022.

There is some confusion and misreporting about what Amazon is doing so I thought it was worth running over.

The key thing to understand is that this is a one-off dispute. For very specific reasons, it is not the start of a war between large retailers and the credit card companies.

Both Amazon and Visa have not been entirely truthful when they told the media that this is not about Brexit, because it absolutely is.

Here is wording from the email sent by Amazon:

“Starting 19 January, 2022, we will unfortunately no longer accept Visa credit cards issued in the UK, due to the high fees Visa charges for processing credit card transactions. You can still use debit cards (including Visa debit cards) and non-Visa credit cards like Mastercard, Amex, and Eurocard to make purchases. Please update your default payment method now, or add one of these new, eligible payment methods if you do not have one.”

What has happened to credit card fees charged to retailers post-Brexit?

Post Brexit, credit card fees have not changed for 99.9% of transactions:

• a purchase from a UK retailer incurs an interchange fee of 0.3%, which is the same as it did whilst we were still part of the EU – this is because the EU legislation on interchange fees was incorporated into UK law, along with all other EU legislation

• a purchase you make in the EU in-person is covered by EU agreements which impose a 0.3% interchange fee cap on purchases in the block, irrespective of where a particular Visa or Mastercard is issued

• a purchase you make outside the EU in-person is not covered by any interchange capping legislation (subject to local rules) but this was also the case pre-Brexit

Once we left the EU, however, there was one loophole for Visa and Mastercard to exploit.

The EU rules only applied to IN-PERSON transactions. EU legislation does not cap interchange fees for online transactions, and UK legislation only covers transactions (online or in person) between two UK companies.

Card fees on purchases made by UK residents from EU companies ONLINE are not capped.

Unsurprisingly, both Visa and Mastercard announced substantial (500%) increases in interchange fees for online transactions that you make in the EU.

The fee on credit card payments rose from 0.3% to 1.5% and the fee on debit card payments increased from 0.2% to 1.15%.

In theory this isn’t a big deal ….

On the face of it, this should be a niche problem.

How much do you buy online from companies in the EU for delivery to the UK? Probably not much, if anything.

However ….

If you buy something from Amazon UK, you are actually buying something from Amazon Europe Core SARL or a related company. This is based at 38 avenue John F. Kennedy, L-1855 Luxembourg.

If you have a credit card which gives bonus points for overseas purchases, you may have received bonus points on your Amazon spending in the past – even though you were charged in Sterling and the goods were delivered from the UK. This is because the payment was processed in Luxembourg.

Visa is presumably treating purchases made at Amazon UK as if they were online transactions made in the EU. The interchange fee would therefore be 1.5% instead of 0.3%.

Why isn’t Mastercard impacted?

There appear to be two options:

• Mastercard has reached an agreement with Amazon over fees, or

• Amazon doesn’t want to block holders of its Amazon Platinum Mastercard from making purchases

American Express is not part of this fight because it has not attempted to increase fee for UK customers making online EU transactions.

I like my Visa card. Is there a workaround for this?

Yes.

If you get a free Curve card – which is a Mastercard – you could use it to make your Amazon purchases from January 2022.

Curve recharges your purchases to another linked Visa or Mastercard. Link your existing Visa card to it and you’re sorted – Amazon charges will continue to pass through to it, via Curve.

You can apply for a free Curve card here. You will get £10 for signing up if you use our link.

You can also, of course, buy Amazon gift cards at other retailers with your Visa card and add them to your Amazon account.

Will Visa and Amazon reach an agreement?

It’s possible, of course, although the damage may have been done following the email today.

If customers swap to a Visa debit card – which is likely if they have a debit card from the same bank that issues their Visa credit card – then the hurt to Visa is limited. If a customer chooses to drop their Visa credit card entirely and switch to a Mastercard credit card, the damage could be far greater.

PS. Whilst writing this article, I noticed that Amazon is currently offering a £40 gift card if you sign up for the free Amazon Platinum Mastercard …..

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