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.
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.
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?
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 …..
Want to earn more points from credit cards? – January 2022 update
If you are looking to apply for a new credit or charge card, here are our January 2022 recommendations based on the current sign-up bonus.
You can see our full directory of all UK cards which earn airline or hotel points here. Here are the top current deals.
There are special sign-up bonuses on both of the BA American Express cards until 28th February 2022. The bonus on the free card is doubled to 10,000 Avios and the bonus on the Premium Plus card is increased from 25,000 Avios to a huge 40,000 Avios.
British Airways American Express
10,000 Avios for signing up (SPECIAL OFFER) and an Economy 2-4-1 voucher for spending ….. Read our full review
British Airways American Express Premium Plus
40,000 Avios (SPECIAL OFFER) and the UK’s most valuable card perk – the 2-4-1 voucher Read our full review
American Express Preferred Rewards Gold
Your best beginner’s card – 20,000 points, FREE for a year & two airport lounge passes Read our full review
The Platinum Card from American Express
30,000 points and an unbeatable set of travel benefits – for a fee Read our full review
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.
The bonus on the Capital On Tap card is increased from points worth 10,000 Avios to 30,000 Avios until 4th February 2022.
The bonus on the British Airways Accelerating Business card is increased from 30,000 Avios to 45,000 Avios until 28th February 2022.
American Express Business Gold
20,000 points sign-up bonus and free for a year Read our full review
American Express Business Platinum
40,000 points sign-up bonus and a long list of travel benefits Read our full review
British Airways Accelerating Business American Express
45,000 Avios sign-up bonus – plus annual bonuses of up to 30,000 Avios Read our full review
Capital On Tap Business Rewards Visa
30,000 points bonus – the most generous Avios Visa for a limited company Read our full review
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.
Apply 31st March 2022 and your cashback will be increased to 2% for the first three months.