EU cap on credit card could actually cost shoppers here €100m in charges
BANKS and credit card companies have been told to absorb new costs instead of passing them on to consumers.
The call came after Mastercard claimed that moves by the EU to cut the charges on credit card payments will actually end up costing shoppers here a combined €100m a year.
Fees charged by banks for processing credit and debit card transactions – known as interchange fees – are a lucrative revenue stream.
The EU commission has proposed a new cap on the charges that banks can apply for accepting Visa and Mastercard payments.
The commission believes that capping these fees will bring savings of €6bn for retailers across the EU, which will then be passed on to shoppers.
But Dr Tony Foley of Dublin City University has produced a report that says the new rules will impact on nine out of 10 credit and debit cards being used in Ireland.
A report written by Dr Foley said that over a five-year period Irish consumers will end up shelling out an extra €500m for using debit and credit cards because of the EU changes.
This will amount to €42 a year for a typical credit card user, the economics lecturer calculated.
And for holders of debit or Laser cards, which can only be used if there is money in the bank account, there will be a cost of €4.60 per card.
He claims the new EU rules will actually increase costs to consumers and small firms.
"The ultimate likely effect is that consumers and small business will end up shouldering the shortfall," he said.
Commission officials are recommending a limit on fees charged by banks to just 0.2pc on the value of a debit card transaction and 0.3pc on credit cards. Currently, the fee can be as high as 1.7pc.
Consumers' Association chief Dermott Jewell called on banks and card companies to absorb the cut in fees.
"The credit card business is highly profitable and it is about time charges were driven down," Mr Jewell said.
Meanwhile, savvy consumers are making sure they have the funds to pay for Christmas without resorting to credit cards.
New research shows that one in four people have been saving all year to fund the festive spending.
Just one in 14 people will use their credit card to cover the bills for Christmas, the research carried out for the bank by Millward Brown shows.