Mastercard warns credit card charges will rise if Commission plan gets green light

Irish consumers will be hit with higher fees if plans by the European Commission to impose a cap on the charges credit card companies can impose on retailers for using their services are introduced, it has been claimed.

Interchange fees are imposed by Visa and MasterCard and collected by banks when a consumer uses a debit or credit card and at present the cost per transaction across the EU varies from 0.2 per cent to 1.5 per cent – the charge in Ireland is set at 0.9 per cent for using a credit card and 11 cent each time a debit card is used.

The commission believes this fee structure is anti-competitive and has said retailers are charged about €14 billion a year, a cost that is passed on to consumers.

Tomorrow it will publish recommendations that look set to cap the fees banks can impose on retailers for using card services. It is proposing that the charges will be capped at 0.2 per cent of the value of debit card transactions and 0.3 per cent of the value of credit card transactions.

Warning on charges
Retailers claim they will pass all savings on to consumers but MasterCard Ireland yesterday warned that evidence from other countries suggested this will not happen. A spokesman said that if banks were denied this revenue stream they would increase their charges elsewhere or curtail services.

The introduction of an interchange cap will have "serious consequences for consumers and small businesses," said Peter Corrigan of MasterCard.

He said that rather than absorb the losses, banks would either reduce the number of services they offered or impose new fees on customers. He said an interchange cap would slow the migration from cash.

“If the commission proposes a capping of interchange it will take away an important revenue line for banks at a crucial time,” he said.

He said that in three countries where such a cap had been introduced – the US, Spain and Australia – the cost to consumers had climbed. He also said the changes would lead to a delay in the roll-out of contactless transactions and the use of mobile phones as electronic wallets "because the investment money won't be there".

He said the different interchange rates across the EU reflected the popularity of electronic payments across each member state and that to “suggest that interchange fees could be levelled across the EU by fiat, without harm to any member state’s consumers, merchants, payment infrastructure or economy, is wrong.”

While the commission will put forward the proposal this week, no changes are likely soon as the proposal would have to be ratified by member states and the European Parliament before it became law.