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On 1 September card processing charges changed. The most significant change was for Debit Cards where fixed per transaction fees were abolished and replaced by percentage charges similar to credit card’s ones.
These changes have occurred because the EU Interchange Fee Regulation (IFR) has imposed a new structure for fees charged by card processing companies to card providers. The new fees are 0.2% for debit cards and 0.3% for credit cards and replace the 50p cap on debit card payments. Interchange fees are hidden from both consumers and businesses as they do not pay them directly. Businesses only pay them as part of their overall card processing charges for the full service.
The EU and UK governments believe that the changes will save businesses in the UK £480million per annum. The impact will be particularly seen on low value debit card transactions where fixed fee charges can represent a high percentage of the payment.
The new fees were intended to be fairer to consumers by lowering costs on smaller debit card transactions, but have led to unintended consequences for car retailers. Moreover, the new credit card rate does not offset the increase in debit card charges that the new fees bring, meaning businesses are paying considerably more to process card payments.
Therefore, the National Franchised Dealers Association (NFDA) has written to the Payments Systems Regulator, calling for a dispensation for the automotive industry for debit card charges.
Fees have increased to 0.2% of the whole transaction, which can equate to a £30 fee on a £15,000 transaction. This is a common problem for businesses that trade in high value goods such as cars. It is uneconomical for the sector to absorb these extra costs and it is likely that the additional charges will be passed on to the customer in higher prices or card handling fees. Many dealers have moved to taking debit card payments from cash in order to comply with anti-money laundering regulations and they are now being penalised with higher fees.
Dealers should regularly review their card processing fees and now would seem timely with these changes. There are a number of providers, so we urge members to shop around for the best rates. The RMI has a card processing commercial service for members which can be accessed through our helpline 01788 538303.