EU plans to cap credit card charges

http://www.irishexaminer.com/ireland/eu-plans-to-cap-credit-card-charges-264249.html

 

The cost of paying with plastic will be limited under EU rules that should also see the cost of goods coming down, saving consumers millions, if not billions, of euro.

Visa and MasterCard dominate the market, and charge companies and businesses different amounts for using their service in different countries.

The European Parliament approved plans to cap these charges — which cost an estimated €10bn a year

— while consumers will benefit from having unauthorised payments refunded within 24 hours of being noticed in future

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The new rules on what are known as interchange fees that banks charge retailers for processing transactions will be capped at no more than 3c, or 0.2% of the value of the purchase — whichever is the lowest — for using a debit card, while the cost of purchases using a credit card will be capped at 0.3% of the value of the purchase. 

Banks currently charge in the region of 3% per transaction using a credit card. The charge varies from bank to bank and on the volume of business of the retailer. 

Countries can introduce lower caps if they wish, and they would apply to both cross-border and domestic transactions in the EU.

MEP Jim Higgins said: “These should translate into lower prices for card users and be a help to hard-pressed retailers.” 

Pablo Zalba, the MEP responsible for steering the draft rules through parliament, said consumers will benefit from the cap on interchange fees “so they will save hundreds of millions or even billions of euro”. 

There will also be greater transparency so people will know how much the fee adds to the cost of their purchase. “There has not been much competition in this market so far. Once this legislation comes into force, people will pay less — and as card use increases the financial institutions will receive more income,” said Mr Zalba. 

Customers using an online account will be able to use payment software other than from the credit card company to make payments without being charge extra fees. 

Unauthorised payments would have to be refunded within 24 hours of being noticed and clients should not be charged any more than €50 for illegal purchases made with a lost or stolen card. 

The next step will be to cap charges on card payments and this will be regulated in the next round of EU rules, the European Commission said. 

The vote by MEPs is the first step in the process and the rules will now go back to the member states in the council and then to a final reading by the new parliament when it takes office after the May elections.