Plastic card transaction fees stir debate



A recent study by the British Retail Consortium (BRC) suggests that banks should not be allowed to impose excessive charges on retailers for accepting credit card payments. However, the UK Cards Association says those fees are reasonable.

Excessive transaction charges?
The BRC research, published in late June, was based upon 7bn transactions in 21,500 shops of all types. According to the results, the average cash transaction costs retailers 2.1p and debit card payments are charged at 8.5p. The body claimed that banks' charges for handling debit card payments have almost doubled in the past five years. However, the most significant discovery was that retailers are hit with a huge charge of 34p every time a customer uses a credit card. The BRC suggested that these fees, combined with the growth of non-cash payment methods, are providing a sizeable and unjustifiable financial boost for banks, while hitting both shops and customers in the pocket.

"There is no justification for such big differences in charges between cards and cash," said Stephen Robertson, director general of the BRC. "With payment technology and efficiency developing, card charges should be going down not up. Contactless systems can bring benefits, but banks are currently levying charges on card payments well beyond what it actually costs them to process those transactions."

A lack of 'key evidence'
However, Mr Robertson's stance has not been endorsed by the UK Cards Association, whose website is a one-stop shop for consumers seeking payment information in the UK. According to Sandra Quinn, director of communications at the body, the BRC did not produce any "key evidence" to back up its claims.

"The key thing from our point of view is that if you compare card costs from five years ago, they are lower because of the increase in technology use," she said. "There is a commercial agreement to do with the necessary standards, and they are much cheaper than they were five or 10 years ago."

Ms Quinn added that 8p is a small charge for a debit card payment, especially when one considers that these transactions cost about £20 when the cards were first introduced. "What they have not accounted for is that with a card service you might be getting a fraud guarantee," she concluded. "With cash, you lose it, it is gone."

Published: 25 June 2010