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

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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.

Why is Amazon dropping Visa cards in the UK

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 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.

Why is Amazon dropping Visa cards in the UK

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%.

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

Why isn’t Mastercard impacted?

There appear to be two options:

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

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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Comments (156)

This article is closed to new comments. Feel free to ask your question in the HfP forums.

  • Lou says:

    Just heard on the radio that the reason why it’s visa and not MasterCard as well is that visa was applying the fee on returns too

  • John llewellyn says:

    Another reason not to use amazon. My credit cards managed and barclaycard are visa. Staff amazon. Shop uk companies.

    • Rob says:

      But most products sold on Amazon are sold by small UK companies …?

      If I was starting a retail business today then selling on the Amazon platform would be a key part of my strategy. They are a dream. You ship them a crate of products and they unbox it, store it, individually pack it and deliver it on your behalf. What more could you want? I could get on with product design and marketing, Amazon does all the legwork.

      • Talay says:

        I know a lot of people who bemoan the costs and rules of doing business through the Amazon platform but as long as Amazon don’t start selling your product themselves (oh yes they do start that 🙂 ) then it is unparalleled in terms of reach.

        As an ex university colleague, now independent retailer says, its the same for Google Ads. If you ain’t spending, then no-one’s looking.

      • Luke says:

        Amazon’s cut is large!

        • Rob says:

          Try renting and manning a warehouse and packing and posting your own products – and then managing it ….

          • Bagoly says:

            Then they see what sells well, get it contract manufactured, and undercut you!

  • Track says:

    Suddenly, American Express became the cheapest/less trouble for a Merchant to acquire!

  • Alex Sm says:

    I thought it was a revenge for the Olympics…

  • Nick says:

    I have noticed over last year many of the online banks have switched Over to MasterCard from visa

  • Michael_S says:

    curve customer service is beyond horrible these days. They blame it on platform migration but it’s been going on for some time. I’m sure they can do another fundraising or IPO by showing growth in card numbers (we live in crazy markets) but I dont know a single person regularly using it outside of points and miles people so I would be very surprised if they can make the unit economics work and be profitable one day

    For myself I only use them for occasional cash withdrawal and non gbp purchases, both would not be profitable for curve at current terms

  • Alex Sm says:

    “ There is some confusion and misreporting about why Amazon is happening”

    – this looks like a rather philosophical discussion!

  • Alin says:

    I was looking at the Amazon credit card for some time now but the points you get for shopping are not worth getting one…unitl I saw that they’re giving a £40 gift card

    Thanks for the info Rob

    • lumma says:

      NewDay cards still work with Curve to be fair, although you’d need to “spend” £4k for a £10 Amazon voucher

This article is closed to new comments. Feel free to ask your question in the HfP forums.

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